US stocks finished slightly lower after a volatile session as broad markets tried to rebound from the recent lows after the sharp selloff in the last few weeks. The Fed Chair Jerome Powell reiterated his determination to comeback inflation with the monetary tools, while noting that recession is “certainly a possibility”. The oil prices slumped further as the commodity markets started pricing in softened demands. The bond yields pulled back on the risk-off sentiment, and gold futures were higher.
Elsewhere, the UK CPI data in May hit a fresh 40-year high of 9.1%, despite a slowdown in the pace of increase. The Canadian May CPI also came in at the highest since 1983, at 7.7%. The hot inflation data suggests that the supply side of issues continues to add weight to the cost of living, promoting the central bank to persist in rate hikes.
AU and NZ day ahead
The S&P/ASX 200 futures were up 0.36%, pointing to a higher open in the ASX. The index is hovering around a 16-month low, with little chance to reverse the downtrend, should resource prices weaken further amid the global recession fears. Rising rates and softening housing prices are hurting the banking sector, while China’s slowdown slashes mining companies’ growth prospects.
The S&P/NZX 50 rose 0.41% in the first trading hour, led by Fletcher Building, Contact energy, and Mainfreight. The NZ government bond yields pulled back from the recent highs, which will provide temporary relief to the local equity markets. However, a record low consumer sentiment that was released by Westpac earlier this week and a slump in the housing price suggest that an economic recession may be around the corner.
Fonterra lifted the milk price forecast by NZ 50 cents to NZ$9.50 per kg of milk solid and announced an FY23 earnings guidance range of 30-45 cents per share, citing the lift of forecast reflects the milk supply and demand picture the current strong US dollar, according to NZX.
The Dow Jones Industrial Average was down 0.16%, S&P 500 fell 0.13%, and Nasdaq declined 0.15%.
Energy stocks tumbled on falling oil prices, down 4%, while defensive stocks, including healthcare, real estate, and utilities, outperformed as investors sought safety. Big techs were mostly lower, with Apple, Microsoft, Alphabet, Tesla, and Meta all down by less than 0.5%. Amazon rose 0.24%.
Crude oil prices tumbled due to a deteriorated economic outlook as both energy and resources started pricing in softening demands on recession fears, though President Joe Biden called Congress to temporarily suspend the federal gas tax.
WTI: US$105.32 (-3.86%), Brent: US$111.74 (-2.91%), Natural Gas: US$6.82(-0.04%)
Gold was higher on the risk-off trades, while silver and copper continued to slide as raw materials fall on recession fears.
COMEX Gold futures: US$1, 839.8 (+0.06%), COMEX Silver futures: US$21. 39 (-0.17%), Copper futures: US$3.93 (-0.41%)
Agricultural products fell further.
Wheat: US$988.75 (+0.15%), Soybean: US$1,476.50 (-2.25%), Corn: US$693.75 (-1.01%).
The US dollar weakened due to a slide in the bond yields. The safe-haven currencies, including Eurodollar, Swiss Franc, and Japanese Yen firmed, while commodity currencies fell on the weakening commodity prices.
(See the below FX rates at EAST 8:42am, Bloomberg)
US dollar index: 103. 995 (-0.21%)
The global major bond yields slid on mounting safety demands.
US 10-year: 3.156%, US 2-year: 3.062%.
Germany bund 10-year: 1.628%, UK gilt 10-year: 2.495%.
Australia 10-year: 3.98%, NZ 10-year: 3.995%.
The crypto markets continued to fall, with the whole market cap slumping to US$884.72 billion from close to US$2 trillion in early April. The digital coins’ markets are facing pressure from liquidation risks due to high leverage and severe volatility. According to CNBC, the bitcoin billionaire Same Bankman-fried agreed to provide a bailout to blockFi and Voyager to save the companies from a liquidity crunch.
(See below prices at AEST 8:49 am according to Coinmarketcap.com)
Bitcoin: US$20,096 (-3.38%)
Ethereum: US$1,063 (-6.09%)
Cardano: US$0.4608 (-4.28%)