Wall Street again bounced off session lows after the Fed officials played down a 1 full percent rate hike, with both Fed Governor Christopher Waller and Fed Bank of St. Louis President James Bullard back a 75-basis point increase in July. Tech shares led Nasdaq to outperform on Fed’s comments, while banks stocks slumped due to disappointing earnings reports. The US short-dated bond yields fell, while the long-dated yields rose, but the 2-year and 10-year bond yields stayed inverted. Commodities continued to price in an economic recession, with copper falling to the lowest since November 2020.
Notably, cryptocurrencies strongly rebounded. Ethereum jumped 9% to near 1,200, and Bitcoin was up 3.5%, to above 20,500. The outperformance in both tech shares and crypto markets suggests that investors start buying dips into tech-related assets on bets that the central banks may turn less aggressive to cushion a slowdown in economic growth.
Asian equities had a strong day on Thursday, but futures are pointing for a lower open. The US-listed Chinese tech giant Alibaba shares tumbled near 5% after being probed for cybersecurity breaches. China’s GDP data will be in the spotlight for today’s session.
AU and NZ day ahead
The S&P/ASX 200 is set to open lower, the futures were down 0.78%. The recent bounce in the tech sectors led the local equity markets to gains on Wednesday. The Australian unemployment rate fell to 3.5% in June, the lowest since 1974, which strengthens the odds for the RBA to continue the supersize rate hike of 50 bps, or even 75 bps.
The S&P/NZX 50 rose 0.4% at the open, with energy stocks leading gains. The strong moves in the dairy sector and tech share, such as Pushpay also indicate the NZ markets are on course for a continuation of the bottom reversal since mid-June.
Dow Jones Industrial Average fell 0.46%, the S&P 500 was down 0.3%, and Nasdaq rose 0.03%.
8 out of 11 sectors in the S&P 500 finished lower. Tech shares outperformed on Fed’s rate hike comments, while bank and energy stocks fell, dragged by slumped oil prices and disappointing bank earnings.
JPMorgan’s second-quarter earnings missed earnings expectations and increased reserves for bad loans by US$428 million. Its earnings per share were reported at US$2.76 per share, short of the estimate of $2.88, or 28% down from a year ago. The CEO, Jamie Dimon, warned of economic risks amid global headwinds. The bank also suspended the share buybacks.
The major companies’ performance overnight (15 July 2022)
Source: CMC Markets NG
Major European indices fell amid the geopolitical tensions and political unrest in Italy. The Italian head of state rejected Draghi’s resignation after the Prime Minister threatened to step down on one of his coalition parties and refused to back a policy package amid curbing inflation.
The Stoxx 50 (-1.66%), FTSE 100 (-1.63%), DAX (-1.86%), CAC 40 (-1.41%).
Crude oil prices were flat after plunging to the lowest level since 25 February as the commodity markets had been pricing in softened demand amid a slowdown in the global economic growth and a foreseeable recession. The bellwether industrial metal copper slumped further, while precious metals deepened losses due to a strong USD and high bond yields.
WTI: US$95.78 per barrel (-0.54%), Brent: US$99.78 per barrel (+0.21%), Natural Gas: US$6.60 per MMBtu (-1.33%)
COMEX Gold futures: US$1, 705 per ounce (-1.71%), COMEX Silver futures: US$18.23 per ounce (-5,05%), Copper futures: US$3.21 per ounce (+3.34%)
Wheat: US$795.00 per bushel (-1.94%), Soybean: US$1,341.00 per bushel (-0.63%), Corn: US$601.00 per bushel (+0.97%).
The US dollar rose 0.67%, to 108.475, while USD/JPY topped 139, to a fresh high in 44 years. EUR/USD was lower but finished above the parity level at 1.0020. The Canadian dollar tumbled against the USD on slumped oil prices.
The US long-dated bond yield rose while the short-dated bond yield fell after the Fed members played down the bet for a 100-bps rate hike.
US 10-year: 2.958%, US 2-year: 3.1279%.
Germany bund 10-year: 1.17%, UK gilt 10-year: 2.10%.
Australia 10-year: 3.40%, NZ 10-year: 3.68%.
The crypto markets jumped as the asset class usually have a positive correlation with the tech shares in the equity markets. The bets of a less aggressive Fed also supported risk assets’ comeback. The global market cap rose 4.41%, to US$922.49 billion in the last 24 hours.
(See below prices at AEST 7:47 am according to Coinmarketcap.com)
Bitcoin: US$20.549 (+3.51%)
Ethereum: US$1,184 (+8.92%)
Cardano: US$0. 4387 (+3.64%)
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