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Wall Street tumbled on Tuesday to close out a losing month following the release of the latest inflation related data and ahead of the Fed’s latest interest rate decision out on Wednesday US time. The S&P500 fell 1.57%, the Dow Jones lost 1.5% and the tech-heavy Nasdaq tumbled 2.04%. For the month of April, the three key indices are set to post a notable loss. Higher-than-expected wages data has raised investor concerns of the rate cut outlook out of the Fed. For the first quarter, the employment cost index which measures wages and benefits, climbed 1.2% which was above economists’ expectations of a 1% rise.

US Treasury yields rose after data was released as investors sought out investments with safer returns in the higher-for-longer interest rate environment if that is the Fed’s stance after the meeting on Wednesday US time where it is widely expected the Fed will maintain the current cash rate of 5.25% to 5.5%.

Across the European markets overnight, markets closed in the red to record their first negative month since October as investors assessed the latest slew of earnings results. The STOXX600 fell 0.6% on Tuesday, Germany’s DAX lost 1.03%, the French CAC declined 0.99% and, in the UK, the FTSE100 closed Tuesday’s session down just 0.04%. On the corporate earnings front, Mercedes and Volkswagen both posted declines in profit which led to shares in the auto-giants falling 5.2% and 4.6% respectively, while Air France KLM shares fell 3.4% after the airline posted a first quarter loss of 489 million euros which the company attributed to costs associated with disruptions and a slower cargo business. Preliminary Eurozone inflation data showed the inflation in the region held steady at 2.4% for April which met economists’ expectations.

In Asia overnight, markets closed mostly higher as investors assessed factory activity figures out of China which came in at an expansion to 50.4 in April compared to 50.8 in March which beat economists’ expectations but indicated a slower pace of activity expansion in the world’s second largest economy. Japan’s Nikkei closed flat, Hong Kong’s Hang Seng index rose 0.09%, and South Korea’s Kospi index rose 0.17%.

The local market has started the week on a green run, with the key index closing Tuesday’s session up 0.35% led by consumer discretionary and real estate stocks, which are two of the rate sensitive sectors. Lithium miners and explorers got a much-needed boost yesterday on a rise in the price of lithium carbonate, which sent Arcadium Lithium to the top of the ASX200 winners with an 8.4% rise, while IGO rose 7.3% and Liontown Resources added 2.9%.

Investors got a boost from Australia’s retail spend data coming out yesterday for March indicating a 0.4% fall in consumer spend, which was well below the 0.2% rise economists were expecting. Retail spend is a key driver of inflation and this reading is a key supporting factor for the RBA to realise some key inflation drivers are easing, which supports the notion to maintain rates at the current level instead of considering another rate hike.

Earnings season continues in Australia for the latest quarter which saw investors respond with mixed reactions on Tuesday. Australian fuel supplier and producer Ampol fell 3.3% after reporting a 21% drop in its Lytton Refiner Margin and a 7.3% decline in refinery production over the last three months.

What to watch today:

• Ahead of the midweek trading session here in Australia the SPI futures are expecting the ASX to open the day down 1.20%, tracking the global sell-off overnight.
• On the commodities front this morning, oil is down 0.92% at US$81.96/barrel, gold is down 1.61% at US$2295/ounce and iron ore is up 0.35% at US$110.54/tonne.
• AU$1.00 is buying US$0.65, 102.26 Japanese Yen, 52.05 British Pence and NZ$1.10.

Trading Idea:

• Bell Potter has downgraded Telix Pharmaceuticals (ASX:TLX) from a buy to a hold and maintain a $14.50 price target on the leading cancer imaging and therapy agent pharmaceuticals company following the release of an outstanding 1Q24 revenue growth and a major inflection point approaching for the company through its first therapeutic asset being a crucial piece of the long-term value proposition. The downgrade to a hold is simply due to valuation as the share price has been on a run recently, and this is the first downgrade since Bell Potter first initiated coverage of the company in 2021.