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Tech rally takes US stocks higher, bond yields surge, oil, gold slump

bullish stock markets

Asia markets are set to open higher following a tech-led rally in US stocks overnight. Wall Street rebounded amid optimism toward first-quarter earnings reports, with growth stocks leading gains, despite a further surge in the long-dated bond yields after the Chicago Fed Resident Charles Evans said the interest rates could rise beyond neutral. Oil slumped after a 4-day-rally on demand concerns after the IMF cut the outlook for economic growth due to the Ukraine war and China's lockdowns. Gold retreated as risk-on sentiment prevails. 

SPI futures were up 0.62%, pointing to a higher open on the ASX. The benchmark index is approaching a one-year high made on January 5, supported by mining and energy stocks. Lower prices in commodities overnight may weigh on these stocks today. KKR is in talks to acquire Australia’s biggest private hospital operator, Ramsay Health Care, in a deal valuing it at more than $20 billion, according to a statement to the ASX. Rio’s Australian iron ore exports slumped 8% below the same period of last year to 71.5 million tonnes.

The NZX 50 opened higher on Wednesday after a drop on Tuesday on the RBNZ governor Adrian Orr’s comments on further adoption of tightening monetary policy and rate hikes. The first quarter CPI data is due for release on Thursday, which is expected to rise further to above 7% YoY, strengthening the odds for more aggressive monetary measures by the Reserve Bank.

US and EU stocks

The Dow Jones Industrial Average rose 1.45%, the S&P 500 was up 1.61%, and Nasdaq advanced 2.15%.

Growth sectors, including consumer discretionary, technology, and communication services, outperformed ahead of big tech earnings. All of the mega-cap companies rose between 1% to 4%, with Meta Platforms, Amazon up more than 3%, and Tesla rising more than 2%.

Netflix shares plunged more than 20% in after-hour trading, a 40% loss year to date. The live streamer lost 200,000 paid subscribers due to service suspension in Russia vs 2.73 million estimated. IBM shares advanced 2% after-hours following an earnings beat.

Bank stocks gained on further rising bond yields and a steepening yield curve. JPMorgan Chase rose 2%, and Goldman Sachs was up 1.8%. 

Energy stocks were the only sector that closed in the red on a slumping oil price, with both Occidental and Chevron down more than 1%. 

The European major indices all finished lower but bounced off session lows on the IMF economic outlook downgrade. The Stoxx 50 fell 0.47%, CAC 40 fell 0.83%, DAX slid 0.07%, and the FTSE 100 was down 0.20%.

Treasuries

The US bond yields continued to surge on the US Federal Reserve officials’ comments on rate hikes. The Chicago Fed President Charles Evans said the interest rates could rise beyond the neutral level. The most hawkish Fed member James Bullard, however, does not see a 75-basis points hike as necessary. The 10-year US Treasury yield surged to 2.94% from 2.84% the previous day, while the 2-year Treasury yield rose to 2.60% from 2.44% a day ago. The 30-year bond yield rose to near 3%. The rising bond yields indicate that a 50-basis point rate hike by the Fed in early May could be a done deal.

The Australia 5-year bond yield also jumped to 2.79%. The New Zealand two-year swap was slightly up to 3.55% after the RBNZ governor Orr said he expects further rate hikes ahead to curb inflation.

Commodities

Commodity prices, including energy and precious metals, were slashed by the IMF’s downgrade to the global economic outlook amid the Ukraine war and China’s Covid-induced lockdowns. The risk-on sentiment also sent safe-haven assets lower as hedging demands faded while risk assets gained.

Oil prices slumped after a four-day rally. WTI futures fell 4.93%, to US$102.31 per barrel, and Brent futures price slid 5%, to US$107.44 per barrel. The natural gas price tumbled 7.3%, to US$7.25 per MMBtu.

The NYMEX gold futures slumped US$34.30 to US$1,952.10 per ounce, and silver tumbled 3.35%, to US$25.27 per ounce, both of which are at one-week lows.

Currencies

The US dollar advanced further on rising US bond yields. Both the Japanese yen and Swiss franc continue to weaken against the greenback due to the contrast of the bond yields and monetary policies. USD/JPY hit a fresh 20-year high at near 129, while USD/CHF rose to a 2-year high at above 0.95.

Australia dollar was the only major currency to firm against the US dollar on strong commodity export prices. Eurodollar and New Zealand dollar were both flat but stayed at their month lows. The British pound was down further against the USD, to the crucial level of 1.30.

Cryptocurrencies

Cryptocurrencies rebounded along with other risk assets. The global crypto market cap rose back to US$1.92 trillion. Bitcoin was up 0.78%, to US$41,305 and Ethereum rose 1.97%, to US$3,096 in the past 24 hours. Both Solana and Terra outperformed, up more than 5%, to US$107 and US$93 respectively during the same timeframe. 


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