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Pressure builds on stocks, bond yields spike, dollar pops

stocks

Asia markets are expected to face pressure following a sharp decline in US markets as bond yields spiked. The US reported a fresh decades-high inflation figure and US Federal Reserve board member James Bullard forecast more rate hikes in the first half of the year. SPI futures are indicating a 0.8% drop in the ASX 200 today and the NZX 50 fell 0.4% at the start of trade on Friday.

US stocks

US stocks snapped a 2-day winning streak. The Dow Jones Industrial Average fell 1.47%, the S&P 500 lost 1.81 %, and Nasdaq slumped 2.1%.

The US January Consumer Price Index printed at 7.5% from a year ago, well above a forecast of 7.2%, a fresh high since 1982. The 10-year US bond yield spiked to above 2%, the highest since August 2019. The stock markets accelerated a selloff after the Federal Reserve Bank of St. Louis President James Bullard gave support to rate hikes of 1% by July and balance sheet reduction as early as April.

All of the 11 sectors finished lower in the S&P 500. Tech shares led the losses. All of the mega-cap companies fell between 1% and 3%. Tesla slid 3%, to just above $US900, Nvidia and AMD were down 3% and 5% respectively.

On the earnings front, Walt Disney and Coca-Cola gained 3% and 0.4% respectively after strong earnings reports.

Treasuries

The 10-year US Treasury yield jumped to 2.04%, and the 2-year US Treasury yield surged 18%, to 1.60%. The short-term dated bond yields spiked more than the long-term dated bond yields. The flattened yield curve is pointing to slow economic growth and indicates an aggressive tightening monetary policy could bring more damage to the economy. 

Commodities

The commodity markets are also facing pressure from a stronger US dollar. WTI crude oil cut early gains and closed flat at $US90, while Ukraine-Russia tension is escalating. Investors are also watching the US-Iran nuclear negotiations.

Gold futures fell $US9 an ounce to $US1828 after hitting an intraday high at $US1841.

Currencies

The US dollar strengthened as bond yields spiked to fresh 3-year highs. The dollar has gone up the most against the Japanese Yen, the pair rose 0.48%, to above 116, the highest in one month. However, Euro was firming against the dollar due to risk-off trades.

Cryptocurrencies

The crypto markets also fell, Bitcoin was down 1.4%, holding around $US44,000, and Ether declined 4.66%, to just above $US3100. 


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