Asian markets are set to open lower following a negative close in Wall Street as the EU inflation data rattles broad markets, with its CPI jumping to 8.1% at a record high. Oil prices also topped a two-month high before retreating after the union imposed a partial ban on Russia’s exports, adding to the worrisome that rampant inflation will lead the region into an economic recession more than risks anywhere else. The eurodollar weakened against the US dollar from one month high, lifting the greenback against the other major currencies as US bond yields climbed.
The Chinese equity markets continued to rise amid reopening optimism, with shanghai 2000, Hang Seng, and CSI 300 all up more than 1%, despite deepening economic distress due to the Covid lockdowns. The Chinese tech giant, Alibaba’s shares jumped near 3% in the US exchange, breaking up the long-term descending trendline from a technical perspective. Investors hold hopes that the world's second-largest economy can rebound rapidly amid easing lockdowns and a divergence monetary policy from the major western countries.
AU and NZ day ahead
The S&P/ASX futures were down 0.36%, pointing to a lower open in the ASX. The Q1 GDP will be in the spotlight today, which is expected to drop amid flooding and Covid disruptions. But it is a lagging economic data, so will not be price sensitive.
NZX 50 fell 0.32% in the first-hour trading. New Zealand housing inflation slowed to a 15-month low in May, or a 15.3% up from a year ago, according to the RBNZ survey, thanks to the rapidly rising interest rates and deteriorating business confidence. Despite moderating housing markets, we may see some positive notes on the local equity markets today, Mainfreight, Auckland International Airport, and Meridian Energy all jumped more than 2% at the open, indicating a positive day for the local stocks.
US stocks finished lower but swung off session lows on the first trading day this week. Dow Jones Industrial Average was down 0.67%, S&P 500 fell 0.41%, and Nasdaq slid 0.63%. On the monthly performance, Dow gained marginally, S&P was slightly lower, down 0.28% for the month, while Nasdaq fell 3.32% in May.
On Tuesday, consumer discretionary and communication services outperformed, up 0.77%, and 0.41% respectively. While the rest of the sectors all closed in red, with energy, healthcare, real estate, and utilities, down more than 1%.
Mega-caps were mixed. Alphabet and Amazon gained 1.3%, and 4.34% respectively, the rest of the big techs, however, fell in the last trading hour, all down less than 1%.
On the earnings front, Salesforce shares jumped 6.5% after-hours due to a beat on earnings expectations. The software company raised its full-year earnings guidance on strong Cloud sales outlooks.
Crude oil prices initially jumped on the news that the EU imposed a partial ban on Russia’s exports but retreated from the intraday high after OPEC expresses concerns about Russia’s ability in output, considering a suspension of its participation in the organization, though Russia pledged to find other importers. Oil prices finished lower, cutting gains from the day-highs around US$120. Natural gas also retreated.
WTI: US$114.67 (-0.35%), Brent: US$116.20 (-1.19%), Natural Gas: US$8.15 (-6.67%)
Precious metals fell as bond yields jumped, coupled with a strengthening USD.
COMEX Gold futures: US$1, 833.8 (-0.95%%), COMEX Silver futures: US$21.55 (-2.49%)
Agricultural products also dropped amid improved prospects in wheat supply, as Russia says to support Ukrainian exports, also a favorable weather forecast for the US crops.
Wheat: US$1,087.50 (-6.05%), Soybean: US$1,693.25 (-2.83%), Corn: US$753.50 (-3.06%).
US dollar rose against the other major currencies as EU inflation data sent the Eurodollar lower while strengthening the ECB’s hawkish approach in the monetary policy. Commodity currencies slid on renewed growth concerns. JPY weakened further against the USD on rising US bond yields.
(See the below FX rates at EAST 7:35 am, Bloomberg)
US dollar index: 101.793 (+0.48%)
Broad bond yields climbed higher as inflation concerns renewed.
US 10-year: 2.844%, US 2-year: 2.563%.
Germany bund 10-year: 1.117%, UK gilt 10-year: 2.09%.
Australia 10-year: 3.345%, NZ 10-year: 3.617%.
Cryptocurrencies consolidate above the key supports after a jump on Monday. The collapsed stablecoin, UST’s sister token, Luna classic soared 700%, to US$8.407, according to Binance. But the broker warned of further volatility ahead. The Terra blockchain launched a new version of Luna, known as Luna 2.0 a day ago. The old version of Luna now is called “Luna Classic”, which had a US$40 billion market cap before a collapse. The sharp rebounding in crypto markets suggests that risk appetite has recovered and the digital token supporters tend to buy the dips in their so-believed value coins, following broad risk assets’ comeback since last week, typically in stock markets.
(See below prices at AEST 8:12 am according to Coinmarketcap.com)
Bitcoin: US$31, 747 (+0.24%)
Ethereum: US$1,948 (-1.93%)
XRP: US$0.4213 (+6.68%)
Cardano: US$0.6105 (+9.11%)