Wall Street bounced off session lows but finished lower for the second straight trading day as more Fed officials reiterated their hawkish stance on rate hikes, fading hopes for a Fed pivot. The St. Louis Fed President James Bullard said the proper zone for the Fed funds rate could be between 5% to 5.25%, which is higher than the current market’s projection. The US bond yields climbed again on the comments, with the 10-year Treasury yield rising to 3.76% from 3.69% a day earlier, lifting the US dollar while pressing on other major currencies and commodity prices, typically in oil and copper prices.
The UK government’s newly unveiled budget plan also reignites the country’s recessionary concerns, sending UK gilt yields higher, while the Eurozone October CPI elevated to a record high of 10.6% year on year, due to surging prices in energy and the weak Eurodollar.
On the bright side, the US-listed Chinese tech shares, including Alibaba, JD.com, and Baidu, were all up between 4-7% after Alibaba provided positive outlooks, saying the Covid impact will be alleviated, along with signs of the Chinese government’s relaxing policy on Chinese techs, which may also offer better growth prospects.
- US benchmark indices pulled back from key resistance as upside momentum faded due to re-ramping bond yields. 8 out of 11 sectors in the S&P 500 finished lower, with Utilities and Consumer Discretionary stocks leading losses, while Technology, Energy, and Consumer Staples were up Most Mega-cap tech companies’ shares closed in red, with Amazon down 2.3% and Netflix falling 3.5%. Apple is the only one that finished higher, up 1.3%.
- Alibaba shares soared 7% in US markets on a positive outlook, despite a miss on earnings expectations. The China e-commerce giant lost $1.09 per ADS vs. a gain of $1.29 estimated, but the loss was mainly attributed to the decrease in market prices of its equity investment in publicly traded companies. Its revenue came to $29.1 billion, or a 3% growth year on year, slightly lower than an estimated $29.69 billion. CEO Daniel Zhang expects “things to continue to improve in a positive direction”.
- The British Pound slipped after the UK government unveiled a £55 billion ($66 billion) fiscal plan to cut spending by £30 billion and increase tax by £25 billion, aiming to reduce the deficit. The government forecasts that UK’s GDP growth will fall to -1.4% in 2023, and the unemployment rate will rise from 3.5% to 4.9% in 2024, which points to an economic recession.
- The Chinese social media giant, Tencent Holdings Ltd. won the approval for its first new major game title, suggesting Beijing’s regulatory crackdown on Chinese tech companies may start easing.
- Asian equity markets are set to open mixed. ASX futures were slightly up 0.08%, Nikkei 225 futures were down 0.04% and Hang Seng Index futures rose 1.83% due to a jump in the Chinese tech shares in the US markets.
- Crude oil futures tumbled 4.5% on the gloomy global economic outlook, and a jump in the US dollar. The deteriorated macro environment, including an possible already economic recession in the UK and some EU countries, China’s Covid resurgence, and the US Fed’s determination to rein in inflation, dimmed the global oil demand outlooks. The resource metal, copper has also dropped 2.7%.
- Cryptocurrencies were flat at their recent lows, though some major players were pausing withdrawals, facing risks of looping collapse following FTX. The newly appointed FTX CEO John Ray said the bankrupted crypto exchange lacked adequate human resources, cybersecurity, accounting, and auditing teams. FTX suggests the former CEO, Sam Bankman-Fried transferred assets to the custody of the Bahamian government.