Wall Street rebounded as investors piled into discounted tech shares to seek bargains, despite the recession warning by Tesla CEO Elon Musk. The EV maker giant plans to lay off 3.5% of its staff on an outlook of a slowdown in growth due to supply-chain disruptions. Meanwhile, Meta Platforms CEO Mark Zuckerberg announced a plan to spend US$10 billion on the R&D of its Reality Lab project, which spooked investors in such a vulnerable time. Tesla’s share jumped 9%, while Meta’s stocks slumped 4%.
It is too early to say a long-term bottom has been established on a deteriorated economic outlook. The comeback was more driven by a technical rebound in an oversold market than material improvements in the economic trajectory.
AU and NZ day ahead
The S&P/ASX 200 futures were up 0.75%, pointing to a higher open in the ASX. Investors got a reprieve from the sharp decline in the last two weeks after the RBA reassured the market participants by scrapping a 75-bps rate hike in July. However, the material sector may be under ongoing pressure due to the softened demands of China and slowdowns in the global major economic growth.
The S&P/NZX 50 jumped 0.85% at the open, despite a price drop in the global dairy trade (GDT). The dairy price fell 6 times in the last 7 global auctions, reflecting weakening demands due to China’s lockdowns and recession fears in the US. The weak dairy price has capped the Kiwi dollar’s gains, which stays at just above 0.63 against the US dollar. The NZ trade balance data is in focus in today’s session.
Fletcher Building forecasts the EBIT at NZ$750 million for the FY22, with the half-year EBIT margin at 9.5%.
The Dow Jones Industrial Average rose 2.15%, S&P 500 was up 2.45%, and Nasdaq jumped 2.51%.
All the 11 sectors finished in green, with energy stocks leading gains, up 5%. The growth sectors and bank stocks also rebounded sharply on dip-buys. Tesla led the consumer discretionary to gain 2.8%, while the technology sector went up 2.5% as big techs were mostly strong. Apple, Amazon, Alphabet, and Microsoft all rose between 2-4%.
Crude oil prices trimmed early gains as recession fears continued to weigh on the commodity prices traders are also eyeing the progress of the Iran nuclear deal negotiation and Venezuela’s oil exports to Europe.
WTI: US$109.19 (+1%), Brent: US$114. 67 (+0.47%), Natural Gas: US$6. 81 (-1.96%)
Precious metals were down as risk-off sentiment faded.
COMEX Gold futures: US$1, 832.8 (-0.32%), COMEX Silver futures: US$21. 6 (-0.77%), Copper futures: US$4.022 (-0.43%)
Agricultural products fell.
Wheat: US$987.25 (-5.68%), Soybean: US$1,510.50 (-1.76%), Corn: US$701.50 (-4.04%).
US dollar was down against most of the other major currencies. USD/JPY surged more than 100 points to hit a fresh 24-year high, topping 136.
(See the below FX rates at EAST 8:56 am, Bloomberg)
US dollar index: 104.18 (-0.29%)
The global major bond yields slid.
US 10-year: 3.275%, US 2-year: 3.19%.
Germany bund 10-year: 1.764%, UK gilt 10-year: 2.65%.
Australia 10-year: 4.05%, NZ 10-year: 4.198%.
The crypto markets rebounded for the second day as risk assets rallied.
(See below prices at AEST 9:06 am according to Coinmarketcap.com)
Bitcoin: US$20,886.38 (+1.90%)
Ethereum: US$1,136.07 (+2.49%)