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Wall Street posts a monthly loss, Yen tumbles following BOJ’s policy tweak

Japanese Yen

Wall Street extended gains for the second straight trading day but finished the month lower. Dow and S&P 500 posted a three-month losing streak, the longest stretch since March 2020. The Japanese Yen plummeted following BOJ’s weak policy tweak on its 10-year bond yield control, sending the USD/JPY soaring to a 33-year high of above 151, which helped pop the king dollar.

On the company earnings, Caterpillar’s shares slumped nearly 7% on signs of slowing down construction machinery demands, echoing economic headwinds. AMD’s stocks slipped more than 4% on weaker-than-expected Q4 earnings guidance. Coupled with Tesla’s sharp decline, these results added concerns for economic growth. But a possible oversold market may encourage a dip-buying momentum entering the new month.

Both gold and oil prices fell as risk-off sentiment abated and a strengthened US dollar added to pressure on the commodity prices. Broad markets seemed to start a new round of rotation ahead of the FOMC meeting tomorrow when the Fed is expected to halt rate hikes for the second consecutive time, but the guidance will be critical for market future trends.

China’s October manufacturing PMI unexpectedly contracted and pressed on the Asian stock market and respective currencies on Tuesday. Futures point to a mixed open across the region today. ASX 200 futures were up 0.41%, Hang Seng Index futures fell 0.18%, and Nikkei 225 futures rose 1.56%.

Price movers:

  • All 11 sectors in the S&P 500 finished higher, with Real Estate, leading gains, up 2.03%. Telecommunication was the weakest performer, only rising 0.18%, dragged by Alphabet and Meta Platforms, down 0.31% and 0.46%, respectively.
  • Caterpillar’s shares sank 6.7% following the third-quarter earnings result. Despite a beat on expectations, the construction machinery manufacturer’s order backlog fell US$2.6 billion, suggesting demand has slowed down due to global headwinds.
  • Tesla’s shares rebounded back to just above 200 after yesterday’s sharp selloff. The EV maker’s shares slumped about 20% following the third-quarter earnings results. Weakened demands and fierce competition caused Tesla’s profit margin to fall further. On the other hand, 200 is a critical psychological support. An oversold technical signal may lead to a dip-buying opportunity.   
  • The Australian electricity generator, Origin Energy, faced a roadblock for the A$15.35 billion takeover offer by Brookfield as its largest shareholder, AustralianSuper, said the offer price of A$8.81 was below its estimate of over A$10 a share.  
  • USD/JPY soared to 151.62 at a 33-year high after BOJ’s disappointing policy tweak. The central bank said it would consider the upper bound of 1% for the 10-year government bond yield as a reference for market operations. The rhetoric was more dovish than expectations, suggesting the bank may continue the ultra-loss monetary policy in the longer term.
  • Crude oil extended losses for the second straight trading day as geopolitical tensions eased and economic concerns arose following China’s weak economic data, ahead of the Fed rate decision.

Today’s agenda:

  • New Zealand Q3 Employment Change
  • RBNZ Governor Adrian Orr Speaks
  • Australian Building Approvals for September
  • US ISM Manufacturing PMI & JOLTS Job Openings

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