Wall Street rose for the second straight trading day as investors digested central banks' hawkish stance on the monetary policy. The Fed Chair, Jerome Powell reiterated his determination to fight inflation, which was the last appearance before the Fed’s rate decision on 21 September, making another 75-bps rate hike in September almost a “done deal”. The European Central Bank raised the interest rate by 75 bps to tame inflation, the largest increase on record. With inflation rising, and growth slowing down, funds flow may start pricing in the “stagflation” cycle for defensive assets.
- Dow up 0.6%, S&P 500 rose 0.66%, and Nasdaq climbed 0.6%. 8 out of the 11 sectors in the S&P 500 finished higher, with the financials and healthcare sectors leading gains as investors sought defensive stocks. All the big banks, including JPMorgan Chase, Citigroup Inc., and Wells Fargo rose by between 2-3%, while Mega-cap tech companies were mixed. Apple fell 0.95% one day after the new iPhone 14 series product release.
- DocuSign (NASDAQ: DOCU) shares soared 18% after-hours on a beat of earnings expectations. The company’s EPS was reported at $0.44 vs. $0.42 est. The revenue grew 22% annually to $622.2 million.
- ECB raised the interest rate by 75 bps to 0.75% to fight surging inflation, which was highly expected. The central bank raised its inflation expectation to 8.1% for 2022, indicating more rate hikes to come, but data dependent though the Eurozone faces server challenges for a possible economic recession due to the energy crisis and soaring food prices.
- Asian futures markets are mixed, pointing to a mixed open. ASX futures were up 0.04%. Nikkei225 futures were down 0.53%, and HSI fell slightly by 0.02%. While Australian and New Zealand equity markets have been buoyed by Wall Street’s rebounding optimism, Chinese stocks continued to suffer from the country’s renewed Covid-lockdowns, with the Chinese Yuan under the pressure of a further devaluation towards a key psychological level of 7.
- FX markets swung in directions as the USD eased surging. EUR/USD stayed at the parity level after bouncing off a day low of 0.9925. USD/JPY rose slightly to just under 144 after hitting a day high of 144.56. Commodity currencies, such as AUD, and NZD, also swung off session lows. The Canadian dollar, however, rebounded as the oil price rose, one day after the BOC’s 75 bps rate hike.
- Crude oil rose slightly after the sharp one-day selloff despite the largest stockpile build in five months. The US crude oil inventories rose 8.8 million barrels for the week ending 2 September, well above the estimate of a draw of 2.0 million. We may see the selloff in oil markets come to a pause since the supply issue remains problematic. WTI futures were up 1%, to $82.81 per barrel, and Brent futures rose 0.5% to $88.43 per barrel.
- Gold price continued to be under pressure on a strong US dollar, while Copper rebounded due to a recovery of risk sentiment. Comex Gold futures fell 0.54%, to $1,718.6 per ounce. And Comex Copper futures rose 2.81%, to $3.53 per ounce.