The US stock markets ended the session with the best 3-day rally since late May, led by Tesla. The EV maker's stocks soared 10% after a beat on the earnings per share, despite a squeezed profit margin. The company also sold 75% of its bitcoin holdings to keep the cash position. According to Refinitiv, 78% of the companies’ earnings have topped analyst expectations so far in the S&P 500. The benchmark index is now inches away from the 4,000-mark, or a nearly 10% rebound from the year-low. Investors’ eyes will be all on the major mega-caps, or “FAANG”’s earnings reports next week.
The ECB has blown traders’ expectations with a supersized 50 basis points rate hike to rein in inflation, while the Transmission Protection Instrument (TPI) has brought a relief rally to the Europe markets. A jump in the Eurodollar has sent the US dollar lower, with the US bond yield sharply declining to 2.89% from above 3%.
In Asia, the Japanese Yen also strengthened against the dollar after the Bank of Japan kept the ultra-loss monetary policy while upgrading the inflation expectations.
With oil prices falling below $100 per barrel again, the commodity markets’ weakness tells that the demand disruption may start pressing consumer prices. Companies’ plans to slow hiring will certainly lead to a ramp-up in the unemployment rate. All the above have traders bid for less aggressive rate hikes by the Fed, which is back the current market rally. However, the worse may yet to come.
AU and NZ day ahead
The S&P/ASX 200 is set to open higher as the SPI futures pricing is up 0.18%. The market sentiment may take a hit by Snap’s weak earnings report in today’s session. Energy stocks’ weakness may also pressure the local equity markets.
The S&P/NZX 50 slipped 0.29% in the first hour of trading. The benchmark index seems losing steam in the last few sessions as uncertainties mount amid high inflation and a fall in commodity prices.
Dow Jones Industrial Average rose 0.51%, the S&P 500 was up 0.99%, and Nasdaq advanced 1.36%.
Growth stocks again led broad gains, with the consumer discretionary sector up 2.25%. Energy stocks fell on a slump in oil prices.
Snap shares plunged 25% in after-hours trading due to a miss on both earnings and revenue expectations, dragging on other social media stocks. Meta Platforms were down 5% in the extended hour. The negative result may weigh on Nasdaq’s futures in today’s session. Snap plans to slow new hires amid weakening revenue growth and economic downturns. The social media company also faces challenges of Apple’s 2021 iOS update and server competition from TikTok.
Amazon announced to buy One Medical for US$3.9 billion, remarking its ambition of expanding into the healthcare industry. One Medical’s shares soared 70%.
The major companies’ performance overnight (22 July 2022)Source: CMC Markets NG
The European markets were mixed on the super rate hike by the ECB and cloudy economic outlooks.
The Stoxx 50 (+0.31%), FTSE 100 (+0.09%), DAX (-0.27%), CAC 40 (+0.27%).
Crude oil prices tumbled on a jump in the gasoline stockpiles, which shows the second straight week increase to 14 million barrels, according to the EIA. At the same time, a darkened economic outlook sparks worries about softening fuel demands, which also press on the crude markets. However, the gas supply shortage in Europe may continue to keep oil prices steady at the recent level. Gold bounced on a weakened USD, while agriculture products were lower.
WTI: US$96.35 per barrel (-3.53%), Brent: US$104.12 per barrel (-2.80%), Natural Gas: US$7.93 per MMBtu (-0.94%)
COMEX Gold futures: US$1,717.5 per ounce (+1.02%), COMEX Silver futures: US$18.78 per ounce (+0.6%), Copper futures: US$3.306 per ounce (-0.57%)
Wheat: US$806.25 per bushel (-1.62%), Soybean: US$1,301.50 per bushel (-1.46%), Corn: US$573.50 per bushel (-2.80%).
The US dollar declined against the other major currencies on the falling US bond yields. The dollar index slid 0.47%, to 106.45 as the Eurodollar strengthened on the ECB’s 50 bps rate hike. USD/JPY fell 0.67% to 137.50 at AEST at 8:30 am after the BOJ rate decision.
The global bond yields were lower as traders bid for the Fed’s turnaround from hawkishness.
US 10-year: 2.87%, US 2-year: 3.09%.
Germany bund 10-year: 1.21%, UK gilt 10-year: 2.04%.
Australia 10-year: 3.56%, NZ 10-year: 3.70%.
Bitcoin fell slightly in the news that Tesla sold 75% of its holdings, which weighs on the broad cryptocurrencies. The crypto market is still on a rebounding trend since mid-July, where bitcoin is up 12% and Ethereum rose 32% in the last 7 days.
(See below prices at AEST 8:36 am according to Coinmarketcap.com)
Bitcoin: US$23,025 (-0.49%)
Ethereum: US$1,572 (+32.40%)