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Spikes in rates send Wall Street lower, Asian markets set to fall

USD

Wall Street started the first trading day on a back foot as bond yields spiked amid strong US service PMI data, which strengthens the odds for more aggressive rate hikes. The US service PMI for August rose to 56.9 at a four-month high, well above economist's estimate of 55.3. The strong data suggests that consumer demand for services remains strong, despite rising rates and high inflation, given a stable pay rise, which further strengthened the odds for the Fed to continue its aggressive rate hikes, sending the US 2-year bond yields to the highest since 2007. 

  • The Dow Jones Industrial Average was down 0.54%, the S&P 500 fell 0.4%, and Nasdaq slipped 0.74%. 7 out of 11 sectors in the S&P 500 closed in red, with the energy and communication services stocks leading losses, down 1.1% and 1.25% respectively, while real estate outperformed, up 1.03%.
  • The APAC currencies tumbled against the US dollar due to a surge in the US bond yields.  USD/JPY rose 1.57% to 142.80. The Aussie dollar slumped after the RBA’s fourth 50-bps rate hike, dragged down the Kiwi dollar. Both AUD/USD and NZD/USD dropped 0.91%, to 0.6734 and 0.6736, respectively.
  • Apple is to launch its iPhone 14 event later today, with expectations to unveil the “Pro” model with a 6.1-inch and 6.7-inch screen. The event may bring price volatility to the tech giant in such a negative market sentiment. In history, Apple’s shares did not necessarily go up amid new products release.
  • Asian stocks are set to open lower, with the Chinese yuan falling to a fresh 2-year low. The Chinese yuan devalued to 6.97, approaching a key psychological level of 7% despite PBOC’s measures to cut Forex Reserve Ratio. ASX 200 futures were down 0.54%, Nikkei225 futures slid 0.14%, and HSI futures fell 1.01%.
  • European markets closed slightly higher, while the natural gas price slumped 9% to a one-month low. The new UK PM Liz Truss is reported to deliver a £100 billion energy stimulus package to tackle cost-of-living issues, which helped push consumer stocks higher.
  • Gold reversed early gains and finished lower due to a strong US dollar. The gold futures slid 0. 56% to 1,712, with the key support level of 1,688 in focus.
  • Crude oil fell after the smaller-than-expected plan of OPEC+’s output cut, along with a strong US dollar and China’s renewed covid-lockdowns. The WTI futures slipped 0.06%, to US$86.02 per barrel. 
  • Bitcoin approaches a year-low of the 18,000 level, while Ethereum steadies. Cryptocurrencies were also under pressure due to risk-off sentiment. Bitcoin fell 3.83% to US$18,988 and Ethereum was down 0.75% to US$1583 in the last 24 hours according to Coinmarketcap. 


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