Asian markets are set to open lower as US stocks fell for the second straight trading day on inflation concerns. Investors assess the possibility of a Fed's pause for rate hikes, while bond yields jumped further as the US ISM manufacturing PMI recorded higher than expected in May, suggesting price pressure may not come off as previously projected. In addition, bank stocks fell after JPMorgan CEO Jamie Dimon warned of an economic “hurricane" amid the Ukraine war and Fed’s policy, days after the Wells Fargo CEO expressed similar concerns. Oil pared gains on news that OPEC plans to suspend Russia's participation.
AU and NZ day ahead
The S&P/ASX futures were down 0.76%, pointing to a lower open in the ASX. The Q1 GDP data printed a strong economic picture of the country, leading the benchmark index to finish higher on Wednesday. The Australian dollar has also outperformed its peer currency New Zealand dollar amid a positive economic outlook, coupled with the recent broad equity markets’ rebound.
JPMorgan cut BHP to Neutral, and set the price target to $A46, while S&P downgraded the company to A- from A. KKR is seeking to buy Ramsay’s A$8 billion hospital sites.
NZX 50 rose 0.04% at the open. The index gained three trading days in a row, not quite tracing the leading US stocks lately as property market’s downturn may shift investment funds to the stock market. The recent jump in infant formula marker stocks also adds to the rally. Investors are eyeing a potential deal between A2 milk and US buyers. Fonterra shares jumped 1.8%m, to NZ$2.74 at the open, soaring 24% since last Friday. RBNZ is to end restrictions on bank dividends from July 1, citing “underlying strength remains in the economy”, which may also give bank stocks a lift.
Dow Jones Industrial Average fell 0.54%, S&P 500 slid 0.72%, and Nasdaq was down 0.72%.
10 out of 11 sectors finished lower in the S&P 500. The energy sector continued to outperform in a "stagflation" environment, while financial stocks fell on JPMorgan CEO Jamie Dimon’s comments. Big banks, including JPMorgan Chase, Wells Fargo, Citigroup, and Goldman Sachs, all slid by more than 1%.
Big techs were mixed but all off session highs, with Amazon, Microsoft, and Alphabet higher, while the rest of the mega-caps were all down. Meta shares slipped on news the COO, Sheryl Sandberg, plans to step down. The social giant stocks were 4%.
Crude oil prices cut early gains that were led by China’s reopening optimism and finished slightly higher as OPEC’s plan to suspend Russia’s participation in the alliance continues to weigh. The organization may increase its production to compensate for Russia’s absence in this case, with an intention to compete with the market's price, while Russia pledges to find other solid buyers as the EU imposes a plan to ban 90% of its exports to Europe by end of this year.
WTI: US$115.26 (+0.51%), Brent: US$115.83 (+0.20%), Natural Gas: US$8.70 (+0.55%)
Precious metals swung off session lows and finished higher as risk assets fell, suggesting haven demands emerge again after last week’s rebounding in stock markets.
COMEX Gold futures: US$1, 849.5 (+0.06%), COMEX Silver futures: US$21.86 (+0.79%)
Agricultural products were mixed as wheat price dropped further amid improved prospects in wheat supply.
Wheat: US$1,041.25 (-4.25%), Soybean: US$1,690.25 (+0.42%), Corn: US$731.25 (-2.95%).
US dollar strengthened for the second trading day on jumping bond yields. But commodity currencies, such as Australian dollar and Canadian dollar were relatively strong against the greenback, supported by optimism towards easing lockdowns in China, and positive economic outlooks. Bank of Canada raised interest rate by 50-basis points, to 1.50%. New Zealand dollar, however, weakened against the US dollar and its peers, on concerns that RBNZ’s aggressive rate hikes will eventually lead to an economic downfall.
(See the below FX rates at EAST 7:44 am, Bloomberg)
US dollar index: 102.58 (+0.80%)
Broad bond yields jumped for the second day in a row as unexpected hot economic data suggests ongoing sticky inflation, weakening the odds for a Fed’s put.
US 10-year: 2.906%, US 2-year: 2.648%.
Germany bund 10-year: 1.181%, UK gilt 10-year: 2.153%.
Australia 10-year: 3.412%, NZ 10-year: 3.662%.
Cryptocurrencies fell sharply as risk-off trades resumed. Both Bitcoin and Ethereum erased gains from earlier this week. The whole market cap dropped 6.08%, to US$1.23 trillion.
(See below prices at AEST 7.55 am according to Coinmarketcap.com)
Bitcoin: US$29,655 (-6.49%)
Ethereum: US$1,800 (-7.46%)
XRP: US$0.396 (-5.71%)
Cardano: US$0.5452(-9.86%) m
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