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US stocks rise on Fed meeting minutes, Asian markets to follow the rally

Stocks rally

Asian markets are set to open higher following a relief rally in the US stocks overnight. Wall Street climbed after the FOMC meeting minutes revealed that more 50-basis-point rate hikes were on the table to tame inflation, while indicating the front-loading rate hikes will leave flexibility to assess the economic outlook later this year.

The stock market's rebounding is more of a relief rally as investors are getting more comfortable with the Federal Reserve's tightening approach to avoid an economic recession, hoping that the following interest rate increase could be less aggressive amid deteriorating macro outlooks.

AU and NZ day ahead

S&P/ASX futures were up 0.18%, pointing to a slightly higher open in the ASX. We could see green in the local equity markets today following US stocks' comeback overnight. Risk sentiment is now titling upside and hopefully, the rebounding moment will persist.

The New Zealand Reserve Bank raised the OCR by half of the percentage to 2%, indicating the benchmark rate will hit 3.51% by 2025. The Reserve Bank insists to carry on the aggressive monetary policy to curb 30-year high inflation, which printed at 6.9% in the first quarter. NZD spiked on the rate decision and is most likely to continue the uptrend trajectory.  

NZX 50 was up 0.23% at the open. Fonterra reported earnings of NZ$825 million, 15% down year-on-year, due to a squeezed profit margin amid China’s lockdowns, Covid disruptions, and rapid devaluation of the Sri Lankan rupee. The company’s shares are trading at a 52-week low of N$2.8.

US

The Dow Jones Industrial Average rose nearly 200 points, or 0.6%, to 32,121. 53, the S&P 500 climbed 0.95%, and Nasdaq advanced 1.51%. 

The consumer discretionary stocks led broad gains as investors hold optimism toward high-end retailers that can persevere the macroeconomic hardships. Nordstrom’s shares jumped 13% on a beat on sales expectations and the strong guidance. Tesla’s shares rose more than 4%.

Technology stocks also rebounded strongly, with most of the mega-cap companies, including Microsoft, Meta Platforms, Amazon, and Apple, up between 1-3%. Alphabet’s shares fell 0.17%.

The Energy sector climbed on rising oil prices. Both Exxon Mobil and Occidental rose 2%. Chevron was up 1.6%.

On the earnings front, Nvidia shares sank 7% in the after-hours trading amid weak second-quarter guidance, despite a beat on both earnings per share and sales revenue. The chipmaker raised concerns about the impact of the Russia-Ukraine war and China’s lockdown.

EU

The broad European stock markets rebounded, led by energy stocks, as the risk sentiment recovers from the recent recession fears. The Stoxx 50 (+0.81%), FTSE 100 (+0.51%), DAX (+0.63%), CAC 40 (+0.73%). Read more

Commodities

Crude oil prices were rather flat amid China’s expanding lockdowns into the capital city, Beijing, with Shanghai on the gradual procedure of easing health restrictions, while traders keep one eye on the progress of a potential EU ban on Russia’s oil export, which becomes more promising with Hungary imposing a state emergency amid energy crises.

WTI: US$110.33 (+0.51%), Brent: US$114.43(+0.77%), Natural Gas: US$8.97 (+1.99%)

Precious metals retreated from the last few days’ rally as the USD strengthens amid the Fed meeting minutes.

COMEX Gold futures: US$1,852 (-0.718%), COMEX Silver futures: US$21.98 (-0.38%)

Algaculture products were lower.

Wheat: US$1,148.25 (-0.56%), Soybean: US$1,681(-0.71%), Corn: US$772.25 (+0.06%).

Currencies

US dollar firmed as the Fed meeting minutes show more 50 basis-point rate hikes on cards in the next 2 to 3 meetings. New Zealand dollar spiked on the RBNZ rate decision of a further 50 basis points lift for the second time in a row. However, the Kiwi dollar pared losses and finished flat against the USD as the dollar strengthened. JPY, EUR, and CHF eased rising against the greenback as haven demands faded.

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

US dollar index: 102.13 (+0.26%)

EUR/USD: 1.0680

GBP/USD: 1.2575

USD/JPY: 127.27

USD/CHF: 0.9609

USD/CAD: 1.2815

AUD/USD: 0.7084

NZD/USD: 0.6474

Treasuries

Bonds yields were little changed, steadied at the month-low levels as bonds are in favor as the safe-haven assets.

US 10-year: 2.745%, US 2-year: 2.50%.

Germany bund 10-year: 0.947%, UK gilt 10-year: 1.907%.

Australia 10-year: 3.235%, NZ 10-year: 3.535%.

Cryptocurrencies

The leading cryptocurrencies continue to consolidate above the recent lows, singing potential rebounding opportunities. The whole market cap dropped 0.27%, to US$1.27 trillion in the last 24 hours according to Coinmarketcap.

Backers of Terra have voted to revive the Terra ecosystem without the UST stablecoin after the algorithm collapse earlier this month, aiming to create a new Terra blockchain and its associated Luna token, according to CNBC. However, investors seem not to regain confidence about the stablecoin’s re-unite, Luna traded at 0.0001864 at AEST 8:04 am, up 17% in the last 24 hours

(See below prices at AEST 8:04 am according to Coinmarketcap.com)

Bitcoin: US$29,810 (+0.91%)

Ethereum: US$1,966.86 (-0.70%)

XRP: US$0.4083 (-0.31%)

Cardano: US$0.5179 (-0.32%)

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