Asia markets are set to open higher as US stocks snapped a two-day losing streak with earnings season kicking off. Bond yields pared gains as investors looked beyond the 41-year high inflation and merged into beaten-up tech shares ahead of the earnings reports. The Chinese government's vows to further stimulate the economy also added optimism.
SPI futures rose 0.23%, pointing to a higher open in the ASX. The falling bond yields and China’s loosening monetary policy helped the Australian markets rebound on Wednesday. The energy sector may continue to benefit from the increasing demands and the US markets’ rally.
The NZX 50 could gain momentum from the spill-over effect from the global markets after falling on the 50-basis point rate hike by the RBNZ on Wednesday. It will be interesting to see if Air New Zealand could gain on the global optimism toward airlines.
US and EU stocks
The Dow Jones Industrial Average was up 1.01%, the S&P 500 advanced 1.12% and Nasdaq jumped 2.03%.
Risk-off sentiment sent the broader markets higher, with tech shares leading gains. Apple, Microsoft, and Alphabet were all up more than 1%. Amazon and Tesla Motors climbed more than 3%. Meta Platforms rose 0.4%.
Airlines and cruises’ stocks jumped as Delta Air Lines expected a profit for the second quarter despite rising fuel costs as bookings jumped. The carrier’s share price surged 6%. Other traveling-related stocks all spiked on the optimism, with American Airlines surging 10%, and Carnival up 5%.
Energy stocks also strongly performed as oil prices rose for the second trading day. Occidental climbed 0.8%, Devon Energy rose 2.3%, and Chevron was up 1.59%.
The financial sector underperformed on falling bond yields, with JPMorgan Chase’s shares dropping to a 52-week low due to weakened guidance. CEO Jamie Dimon noted economic uncertainty, such as high inflation, disruptions to the supply chain, and the Ukraine war dimed the bank's outlook. He also warned of a possible recession on the horizon.
Europe's major indices closed mixed ahead of the ECB policy meeting. The UK inflation hit 7%, well above estimates. The Stoxx 50 fell 0.09%, CAC 40 edged up 0.07%, DAX slid 0.34%, and the FTSE 100 was slightly up 0.05%.
US bond yields fell as traders saw signs of peaking inflation in March data. The 10-year US Treasury yield was down to 2.70%. The 2-year Treasury yield slumped to 2.35%. The bond yields curve steepened further after briefly being inverted in early April. But the recession cloud may not be gone as history tells that economic downfall usually arises one year or so after the inversion occurs.
Australia 5-year bond yields also dropped sharply to 2.67%, a one-week low. The New Zealand two-year swap slid to 3.5% from 3.63% the previous day after the RBNZ raised the OCR by 50 basis points, the largest scale of a rate hike in 22 years.
Oil prices continued to rebound on expectations of increasing fuels demands as global health restrictions are easing; the US major carrier, Delta Air Lines indicated a jump in books for the second quarter. Plus, some areas of China have come out of lockdowns, while Beijing pledges more stimulus measures. All in all, the Ukraine war has had a material impact on the global energy supply, with peace talks in a stalemate.
WTI futures climbed 3.6%, to US$104.22 per barrel, and Brent futures price was up 3.3%%, to US$108.84 per barrel.
Precious metal prices were up for the fifth trading day straight, but the upside momentum seems to be fading. The NYMEX gold futures rose US$5.2, to US$1,981.3 per ounce, and silver rose 0.85%, to US$25.95 per ounce.
It was a big day for the major central banks, both the New Zealand Reserve bank and Bank of Canada raised the benchmark interest rate by 50 basis points.
While the USD slumped on falling US bond yields, the Eurodollar was up 0.6% against the US dollar, rebounding from the key support at 1.08 to 1.0895. It is expected the ECB will turn to a more hawkish tone in today’s policy meeting amid high inflation. The Canadian dollar strengthened 0.6% against the greenback after the BOC raised interest rates by a half percent. The New Zealand dollar, however, dropped after a short-lived spike as the RBNZ indicated the rate hikes may not be sustained due to global economic uncertainty.
Cryptocurrencies rallied together with the stock markets as digital tokens are seen as riskier assets. The whole market cap rose 3.24%, to US$1.91 trillion in the last 24 hours, with bitcoin up 4%, to US41,245, and Ethereum advancing 3.5%, to US$3,104.