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US stocks extend gains amid retailer-fueled rally, Asian markets are set to take the ride

Stocks rally

Asian markets are set to open higher as both Europe and US stocks gained for the second straight trading day amid a retailer-led rally. Risk-on sentiment was boosted by some US retailers' strong earnings and positive outlooks. The UK retail stocks were also higher after the government imposed a windfall tax on the oil and gas sector, intending to aid consumers’ spending by reducing cost-of-living. The extended broad relief rally suggests that investors may have overacted to a recession scenario that could be triggered by central banks’ rate-hikes approach, though the economic uncertainties remain, with the upcoming US PCE data to be released later today.

AU and NZ day ahead

The S&P/ASX futures were up 0.97%, pointing to a higher open in the ASX. The benchmark index fell for the second consecutive trading day as big miner stocks tumbled amid China’s economic growth downgrade due to Covid lockdowns. Iron Ore price drops below $130 per metric ton due to output cuts. Investment funds may start rotating to growth sectors, with risk sentiment recovering in the tech stocks.

NZX 50 was up 0.58% at the open. Rising rates and China’s lockdowns are certainly having a negative impact on the local economy. RBNZ indicated raising the OCR to 4% by 2023 to curb elevating inflation, while economists do not see the urgency of such an aggressive rate hike, warning consequences for economic growth. The local equity markets have been undergoing pressure from the macro headwinds.

US

The Dow Jones Industrial Average was up 1.61%, the S&P 500 rose 1.99%, and Nasdaq advanced 2.68%. 

The consumer discretionary sector jumped nearly 5%, while growth stocks gained steam amid dip-buys. Macy's Inc's shares jumped 19% after the retail shop upgraded its profit outlook. Dollar Tree Inc. rose 21% amid positive guidance. 

All the mega-cap giants were up between 1-4%, with Tesla Motors up 7.4%, and Meta Platforms rising 4.2%. Apple’s shares rose 2% as the tech giant sets a flat target for its iPhone production of 200 million due to global headwinds.

In addition, Broadcom Inc's $61 billion takeover deal of VMware Inc. also added to the optimism, with both companies’ shares rising 3.91%, and 3.46% respectively.

On the economic front, the second read of the US first-quarter GDP printed at -1.5%, warning of a slowdown in the economic growth. The US mortgage rate dropped to 5.1%, the biggest decline in two years, offering relief to the housing markets.

Europe

The broad European stock markets rebounded, led by retail stocks. Energy stocks also shrugged off the windfall tax implemented by the government. The Stoxx 50 (+1.72%), FTSE 100 (+0.56%), DAX (+1.59%), CAC 40 (+1.78%). Read more

Commodities

Crude oil prices jumped due to the risk assets relief rally. Risk sentiment was boosted by the optimism toward Shanghai’s easing lockdowns and an EU ban on Russia’s oil. Traders also expect rapid rising fuel demands as the US Memorial Day holiday is near. 

WTI: US$114.090 (+3.41%), Brent: US$117.70 (+3.22%), Natural Gas: US$8.90 (+1.09%)

Precious metals were up marginally as haven demands faded.

COMEX Gold futures: US$1,848.5 (+0.119%), COMEX Silver futures: US$22.02 (-0.69%)

Agricultural products were mixed. Sugar slid after India limits its sugar exports to 10 million tons to secure the domestic supply.

Wheat: US$1,14.25 (-0.44%), Soybean: US$1,726.50 (+2.71%), Corn: US$765.00 (-0.94%).

Currencies

US dollar fell as Eurodollar and Canadian dollar strengthened. The ECB’s indication for a rate hike in July continues to support the EUR, while Canadian dollar firmed amid rising oil prices.

(See the below FX rates at EAST 7:47 am, Bloomberg)

US dollar index: 101.77 (-0.30%)

EUR/USD: 1.0730

GBP/USD: 1.2603

USD/JPY: 127.11

USD/CHF: 0.9590

USD/CAD: 1.2773

AUD/USD: 0.7097

NZD/USD: 0.6480

Treasuries

Bonds yields were little changed, steadied at the month-low levels.

US 10-year: 2.747%, US 2-year: 2.478%.

Germany bund 10-year: 0.993%, UK gilt 10-year: 1.966%.

Australia 10-year: 3.197%, NZ 10-year: 3.462%.

Cryptocurrencies

Cryptocurrencies have been under pressure as investors are digesting an algorithm collapse of the stablecoin, UST, Terra two weeks ago. The whole market cap dropped 3.16%, to US$1.23 trillion in the last 24 hours according to Coinmarketcap.

(See below prices at AEST 8:14 am according to Coinmarketcap.com)

Bitcoin: US$29,615 (-0.61%)

Ethereum: US$1,838 (-6.41%)

XRP: US$0.3986 (-2.13%)

Cardano: US$0.4856 (-5.98%)


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