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Stocks halt gains on growth concerns as bond yields fall, oil, gold up, USD weakens

stocks fall

Asia markets are set to open lower as US stocks snapped a two-day winning streak. Oil prices strengthened for the second straight trading day, raising concerns that climbing inflation will eventually lead to a slowdown in economic growth. The US Federal Reserve's vow to pin down inflation by taking a more aggressive approach to tightening monetary measures also adds to the worry. The US long and short-dated bonds yields have briefly inverted a day ago, flashing a recession alert to the economy. 

SPI futures are flagging a 10 point gain at the start of trading on Australia’s S&P/ASX 200. Tech stocks led the index higher on Wednesday, to a close above  7,500 for the first time since January 6. 

The NZX 50 is slightly lower at the start of trade. Air New Zealand shares slumped 8% at the open. NZ’s biggest carrier launches a NZ$1.2 billion Rights Offer, “allowing eligible shareholders to buy additional shares in Air New Zealand at a discount relative to the prevailing share price”, according to NZX.

US and EU stocks

The Dow Jones Industrial Average fell 0.19%, the S&P 500 declined 0.63%, and Nasdaq was down 1.21%.

The growth sectors led the broader losses. Chip stocks underperformed. Both Nvidia and Advanced Micro Devices fell more than 3%. All of the Mega-caps finished lower, with Amazon down 1.8%, and the rest of the group, including Apple, Microsoft, Meta Platforms, and Alphabet dipping less than 1%.

The bank sector was hit by the falling bond yields. JP Morgan Chase declined 0.5%, Wells Fargo fell 3%, and Citigroup Inc. was down 2.8%. 

Energy recovered losses from the last two day's selloff, up 1.17%. The defensive sectors, such as Utilities, consumer staples, and Healthcare stocks, also finished higher, supported by the risk-off sentiment. 

The US-listed Chinese companies fell on news that the Securities and Exchange Commission may add Baidu to the delisting list due to Beijing’s decline on the inspection requirement. Baidu’s shares price fell 2.59%.

On the economic front, the ADP job number was recorded at 455,000, in line with expectations. The final GDP data, however, fell to 6.9% from the previous reading of 7%, which adds to the growing concerns.

The Europe major indices finished lower as officials warn of a recession risk due to gas supply woes, with Stoxx 50 down 1.08%, DAX dipping 1.45%, and CAC 40 falling 0.74%. The FTSE 100 was up 0.55%.

Treasuries

The US bonds yields fell for the second trading day, showing signs that investment funds start rotating to the bond markets to hedge recession risks. The 10-year US Treasury yield fell to 2.35%. The 2-year Treasury yield dropped to 2.30%.

When the bond yields curve inversion occurs, it suggests that investors tend to buy the long-dated bonds rather than the short-dated bonds as the near-term outlook for the economy is weakening, which causes the long-dated bonds' yields to be lower than the short-dated bonds' yields. Bond prices have an inverse relationship with its yield.

Commodities

Oil prices rebounded for the second trading day as hopes for a ceasefire between Russia and Ukraine faded. The Ukraine-Russia war is shaping a global trade restructuring between the west and east, leading to a de-globalization between borders, in which the cost-driven high inflation has little chance to cool down. The hedging demands for commodity assets are most likely to keep the oil market momentum going.

WTI futures were up 2.91%, to US$107.25 per barrel. Brent rose 2.75%, to US$110.72 per barrel.

The precious metals climbed on the risk-off trades. The NYMEX gold futures rose 1.09%, to US$1,932.95 per ounce. Silver advanced 1.21%, to US$25.03 per ounce.

Currencies

The US dollar weakened further as the US bonds selloff paused. Eurodollar and Japanese Yen reversed losses to the USD, up 0.66% and 0.85%, to the US dollar respectively. Both AUD and CAD rose slightly against the dollar.

Notably, the New Zealand dollar strengthened for the second day on the strong local economic data. The March ANZ business confidence index rose to -41.9 from -51.8 the previous month.

Cryptocurrencies

The Crypto markets were flat, but the total market cap rose slightly to US$2.15 trillion from US$2.14 in the last 24 hours. Bitcoin fell slightly but still stayed above US$47,000, and Ethereum held up at above US$3,400. Solana outperformed, up 6.5%, to US$120.38. In the last 7 days, Solana rose 29%.


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