Asia markets are set to open lower following a sharp tech-led sell-off in US stocks overnight. Investors continue to dump risk assets amid the US Federal Reserve's accelerating tightening measures and widening lockdowns in China.
Tesla shares slumped 12%, or more than $100 billion in market value after Twitter's takeover deal, as investors suspect the Tesla boss may have to sell shares to fund the purchase. The “fear gauge” also known as the CBOE Volatility Index (VIX) surged 24%, to 33.52.
War-induced inflation and the energy crisis continue to weigh on investor sentiment. Oil prices reclaimed $100 on comments by the Federal Minister for Economic Affairs in Germany, Robert Habeck, that the country is close to imposing a full embargo to Russia’s oil export. Natural gas prices advanced further on Russia’s supply halt to Poland.
Furthermore, the widening of China’s lockdowns is heavily restraining the demand side and causing further disruptions to the supply chain. The global headwinds put risk assets on edge amid fears of a foreseeable global economic downfall.
Australia and New Zealand day ahead
SPI futures slid 1.47%, pointing to a lower open on the ASX. The benchmark index dropped 2.08% on Tuesday amid a broader market selloff on China’s lockdowns. Mining and energy stocks were slashed due to growth concerns. CBA announced Chairman Catherine Livingstone will retire, with Paul O’Malley named to take over. Aussie Investors are eyeing Q1 2022 CPI data today, expected to spike to 1.7% q/q and 4.6% y/y, which would be the highest annual increase since 2008. This is a key indicator under the RBA’s watch which will support a potential early rate hike in May or June. May’s RBA meeting would therefore be considered ‘live’.
The NZX 50 dipped 0.92%. Pushpay will be in the spotlight today after a 25% rally on news of a potential acquisition offer on Tuesday. The company says it does not necessarily translate into any cash transactions.
US and EU stocks
The Dow Jones Industrial Average dropped 2.38%, the S&P 500 declined 2.82%, and Nasdaq slumped 3.95%, to a one-year low.
10 out of 11 sectors in the S&P 500 closed in the red, with growth sectors leading losses. Consumer discretionary stocks dropped 5%, dragged down by Tesla. All big techs fell between 2 and 5%.
Google parent Alphabet shares fell more than 6% in after-hours trading on missed revenue expectations after reporting earnings, despite an announcement of a $70 billion share buyback. Microsoft beat earnings estimates but shares fell slightly after hours on slow growth.
Bank stocks were also hit by falling bond yields. JPMorgan Chase fell 3%, Wells Fargo was down 2.7% and Citigroup dropped 1.7%.
Energy is the only sector that finished slightly above the flat line as oil prices rebounded on supply concerns. Devon Energy rose 0.37%, Exxon Mobil was up 0.03% and Occidental was down 0.2%.
The European major indices gave up early gains and finished mostly lower due to the sell-off in US equities. The Stoxx 50 fell 0.96%, CAC 40 was down 0.54%, DAX slid 1.20% and the FTSE 100 was up 0.08%.
Treasuries
US bond yields continue to fall on risk-off sentiment. The 10-year US Treasury yield fell to 2.72%, and the 2-year Treasury yield was down to 2.48%.
The Australia 5-year bond yield slid to 2.82% and the New Zealand 5-year bond yield was flat at 3.49%.
Commodities
Crude oil rebounded amid supply concerns as Germany indicated it planned to fully ban Russia’s oil exports despite a wider lockdown in China. The Ukraine war and sanctions on Russia continue to have a major impact on oil prices.
WTI crude futures rose 3.22%, to US$101.71 per barrel, and Brent futures were up 2.7%, to US$105.11 per barrel. The natural gas price continues to rise, up 2.58%, to US$6.84 per MMBtu.
Gold rebounded from a one-month low. NYMEX gold futures were up $10.40, to US$1,906.40 per ounce. However, silver fell 0.51% to US$23.55 per ounce.
Currencies
The US dollar index rose for the fourth consecutive trading day, to 102.35 (0.56%), the highest since March 2020. All other currencies fell against the USD but the Japanese yen. USD/JPY fell 0.71%, to 127.22 on falling US bond yields as bonds are favored on the risk-off sentiment.
The Eurodollar fell further against the USD on Russia’s threat of the gas supply halt, down 0.69% to 1.0636, the lowest seen since 23 March 2020. The British pound also tumbled against the greenback to 1.2577, the lowest since July 2020. All commodity currencies continued to weaken against the US dollar on economic growth concerns.
Cryptocurrencies
Cryptocurrencies tumbled. Bitcoin fell 4.4% and ethereum slid 5.3% to US$38,398 and US$2,842 respectively.
Disclaimer: CMC Markets is an order execution-only service. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
