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Asian stocks set to plunge following US market rout on recession fears

bear markets

Asian equity markets are set to sink following the US stock market rout overnight, as Wall Street plunges for the third straight trading day, with S&P 500 officially falling into the bear market, to a new year low.

The sell-off was triggered by the hotter-than-expected CPI data released last Friday, which spooks markets with expectations of more aggressive rate hikes to be taken by the Fed, eventually leading to an economic recession. The US 10-year bond yield surged to 3.37%, the highest since 2011. The fear gauge, the CBOE Volatility Index, spiked to above 34. Gold futures shed US$50 per ounce, to $1,822, as the US dollar index rose 1%, to 105.07, the highest since 2002.

Elsewhere, cryptocurrencies tumbled to 18-month lows, with both bitcoin and ethereum plunging more than 16% in the last 24 hours. Crypto market cap has been wiped out by more than US$200 billion since last Friday. There are no survivors in such a market condition, and panic-selling may send risk assets even lower ahead of the FOMC meeting this week.

AU and NZ day ahead

ASX is set to sink more than 2% at the open today, as indicated by the SPI futures which were down 2.6%. The ASX 200 falls off the key support level at 6,930, heading to the year-low of 6,758 seen in January. The Australian dollar slid 1.6% against the greenback, to 0.6924, the lowest seen on 16 May. The business confidence data to be released by NAB is in the spotlight today.

The S&P/NZX 50 fell 1.7% in the first-hour trading. The NZ 10-year government bond yield rose to above 4%, the highest since November 2014 as the bond selloff intensified in the local markets following the global trend. The New Zealand dollar weakened against most major currencies but strengthened against the Aussies dollar as the Australian economy exposes to global risks more than Kiwis in terms of international trade and the financial markets.

US

The S&P 500 sank 3.87%, to 3,749.63 on Monday, down 21% year to date, officially entering the bear market territory. Nasdaq sank 4.68%, to below 11,000, deeper into the bear market, or a 31% drop year to date. The Dow Jones Industrial Average fell 2.79%, to 30,516.74.

All the 11 S&P 500 closed in red, with energy stocks leading losses. Exxon Mobil, Chevron, and Occidental all declined between 4-7%. The mega-caps also fell sharply, with Meta Platforms down 6.4%, Amazon sliding 5.4%, and Microsoft declining 4.2%. Chipmakers, including AMD and Nvidia, were down 8.2%, and 7.8% respectively. Tesla’s shares fell more than 7%, despite a 3-for-1 stock split plan.

Europe

European stocks also fell substantially. The Stoxx 50 (-2.69%), FTSE 100 (-1.53%), DAX (-2.43%), CAC 40 (-2.43%). Read more

Commodities

Crude oil prices hold strongly at above US$120 despite the market rout globally as the ongoing war and the sanctions on Russia intensified the undersupply issue, despite China’s renewed partial lockdowns.

WTI: US$120.93(+0.22%), Brent: US$122.42 (+0.34%), Natural Gas: US$8.61(-2.72%)

Precious metals were hammered by the surge in bond yields and a 20-year high US dollar index.

COMEX Gold futures: US$1, 820.2 (-2.95%), COMEX Silver futures: US$21.02(-4.15%), Copper futures: US$4.2(-2.2%)

Agricultural products were mixed.

Wheat: US$1, 086.00 (+0.12%), Soybean: US$1,533.75 (-2.20%), Corn: US$721.50 (+1.31%).

Currencies

US dollar strengthened further to a 20-year high. The dollar index rose 1%, to above 105. USD/JPY hit the highest level since 1998 before pulling back to 134.40, finishing flat at the open price. All the other major currencies were down against the USD.

(See the below FX rates at EAST 8:00 am, Bloomberg)

US dollar index: 105.05 (+1.00%)

EUR/USD: 1.0408

GBP/USD: 1.2134

USD/JPY: 134.43

USD/CHF: 0.9970

USD/CAD: 1.2893

AUD/USD: 0.6927

NZD/USD: 0.6261

Treasuries

Bond yields spiked on elevating US inflation and the rate hike bets.

US 10-year: 3.362%, US 2-year: 3.367%.

Germany bund 10-year: 1.626%, UK gilt 10-year: 2.526%.

Australia 10-year: 3.668%, NZ 10-year: 4.177%.

Cryptocurrencies

Crypto markets plummeted along with the broad selloff. Both bitcoin and Ethereum sank to the lowest levels since December 2020, breaking the pivotal support levels. A total of more than US$200 billion were wiped out of the crypto markets The whole market cap fell under US$1 trillion, at US$960.76 billion. From the technical perspective, the bearish breakout may lead the digital coins back to the pre-pandemic levels.

The largest crypto exchange, Binance paused withdrawals for several hours on Monday. And the crypto lending company, Celsius has stopped clients from taking their holdings out of their accounts.

(See below prices at AEST 8:15 am according to Coinmarketcap.com)

Bitcoin: US$32.977(- 16.05%)

Ethereum: US$1,226.86 (- 16.56%)

Cardano: US$0.4774 (-9.30%)

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