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Wall Street falls on the caution of higher inflation data and earnings season

gas supply

US stocks finished in red on Monday as investors become cautious ahead of the key inflation data and the upcoming company earnings later this week. The growth stocks snapped a 5-day winning streak, with consumer discretionary and service communication sectors leading losses as Tesla shares fell 6.5% on a possible lawsuit case after CEO Elon Musk stopped the US$44 billion deal with Twitter. The latter share’s price tumbled more than 11%, dragging on other social media companies, with Meta Platforms down 4.7%, and Snap falling 6%. The US-listed Chinese stocks also plunged due to a renewed crackdown by the Chinese regulators. Alibaba’s shares shed 9.4%.

Despite a drop in the US bond yields, the US dollar strengthens further to a fresh 20-year high as the Eurodollar tumbled after Russia temporarily halt the major gas pipeline, Nord Stream AG, which intensifies the region’s energy crisis, while the Japanese yen weakened further as the former prime minister, Shinzo Abe’s assassination strengthens votes for the LDP in the election, which may sustain the ultra-loss monetary policy.

AU and NZ day ahead

Although most Asian equity markets are set to open lower as indicated by the futures pricing, the ASX 200 will start the day on a higher note by following the energy’s outperformance in the overnight US session. The Westpac consumer sentiment and NAB business confidence data later today will be a focus for investors to gauge the local economic activities.

The S&P/NZX 50 dipped at the open but major energy stocks were higher. On the back of an energy crisis in Europe, Australian Prime Minister Anthony Albanese’s pledge to make the country a renewable energy powerhouse may further strengthen the clean energy stocks, typically in the Aussie and NZ duo-listed companies, such as Meridian Energy, Genesis Energy, and Contact energy.

The NZ equity markets outperformed its global peers as the leading pace in rake hikes by the RBNZ suggests that the interest increase could hit a peak ahead of all the other central banks too, which provides policy certainty to the financial markets. The reserve bank’s rate decision tomorrow sheds a spotlight on the local markets, with expectations for another 50 bps hike ahead.

US
 

The Dow Jones Industrial Average was down 0.52%, the S&P 500 fell 1.15%, and Nasdaq declined 2.26%. The growth sectors are the laggards, with all the mega-caps losing steam, while defensive stocks outperformed. The company earnings report will start with Delta Airlines on Wednesday, followed by big banks on Thursday. The key CPI data will be also released on Thursday. Hence, the broad losses were more driven by profit-taking on risk-off sentiment.

The major companies’ performance overnight (12 July 2022)

Source: CMC Markets NG

Europe

The Europe major indices all finished lower due to the intensified energy crisis, with the Eurodollar tumbling toward parity with the USD. The Stoxx 50 (-0.99%), FTSE 100 (+0.00%), DAX (-1.40%), CAC 40 (-0.61%).  Read more

Commodities

The commodity markets continued to face downside pressure due to the darkened economic outlooks. The renewed Covid outbreak in China sparks worries about the country’s recovery pace, with sluggish property lending activities, highlighting softened demands and a slowdown in growth. Crude oil and industrial materials were all down, while natural gas jumped on Russia’s major supply halts. Precious metals slumped further on a strong US dollar. Agriculture commodities were mixed.

WTI: US$104.09 per barrel (-0.67%), Brent: US$106.41 per barrel (-0.57%), Natural Gas per MMBtu: US$6.43 (+6.50%)

COMEX Gold futures: US$1, 731.70 per ounce (-0.61%), COMEX Silver futures: US$19.13 per ounce (-0.54%), Copper futures: US$343.05 per Ib. (-2.60%)

Wheat: US$856.50 per bushel (-3.93%), Soybean: US$1,405 per bushel (+0.61%), Corn: US$629.00 per bushel (+0.88%).

Currencies

At the editing time around AEST 8:03 am, the US dollar index jumped 1.12%, to 108.02, a fresh 20-year high. EUR/USD plunged to 1.0037, the lowest since December 2020. USD/JPY rose more than 1%, to a 44-year high at 137. 44. All the other major currencies also fell against the USD, with USD/CAD at 1.3005, AUD/USD at 0.6736, and NZD/USD at 0.6115.

Treasuries

The US bond yields were lower but the yields on the US 10-year and 2-year notes stayed inverted, which is an advanced indicator of an economic recession.

US 10-year: 2.99%, US 2-year: 3.07%.

Germany bund 10-year:1.24%, UK gilt 10-year: 2.17%.

Australia 10-year: 3.50%, NZ 10-year: 3.68%.

Cryptocurrencies

The cryptocurrencies were dumped again as the risk sentiment turned negative due to the broad selloff in the equity markets. The global market cap dipped by 3.36% to US$901.87 billion in the last 24 hours.

(See below prices at AEST 8:09 am according to Coinmarketcap.com)

Bitcoin: US$20,123.37 (-1.42%)

Ethereum: US$1,112.71 (-2.21%)

Cardano: US$0.4403 (-1.44%)


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