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Wall Street eases sell-off as Fed policy reassessed, Asian markets set for mixed open

stock markets

US stocks finished higher after the one-day sell-off as investors reassessed inflation and the Federal Reserve's policy path. The US producer price index for August fell 0.1% from the prior month, sending somewhat of a relief to the inflationary pressure.

While short-dated bond yields climbed higher, yields on longer-dated bonds fell slightly, which deepens the inversion. Rapid rising rates and a slowdown in economic growth may start threatening the US economy with "deflation" instead of "inflation" now. The US dollar retreated, pushing other major currencies slightly higher. Gold, however, is still under pressure from rising bond yields.  

  • The Dow creeped up 0.1%, the S&P 500 rose 0.34%, and the Nasdaq climbed 0.74%. Six out of 11 sectors in the S&P 500 finished higher, with energy and consumer discretionary leading gains, up 2.9% and 1.3% respectively.
  • Netflix expects its ad-supported tier to reach 40 million viewers by Q3 2023, with the shares up 2.75%. The live streamer's shares have jumped 30% since it reported better-than-expected second-quarter earnings results in July.
  • Starbucks jumped 5% as the coffee chain giant boosted its earnings outlook on its investor day, with a three-year financial roadmap, delivering annual 10-12% revenue growth.
  • Asian stock marketsare set for a mixed open as Wall Street stabilises movements.ASX futures were slightly up 0.09%. Nikkei 225 futures rose 0.40% and Hang Seng Index futures are down 0.04%.
  • New Zealand reported better-than-expected second-quarter GDP, which printed at 1.7% quarterly, well above an estimate of 1.0%.  The annualized GDP grew by 0.4%, which slowed from the prior month's 1.2%. Australia is to release employment data, which is expected as another strong figure, with growing new jobs of 35.5,000 in August, and an unemployment rate of 3.4%.
  • The Bank of Japan’s foreign exchange check sent the yen higher, with USD/JPY down 1% to 134.17. The move indicates that the central bank may conduct an exchange intervention when the bank did the same in 1998. However, until the actual steps are taken, Yen may not be able to shake off weakness just yet.
  • The British pound strengthened amid an unexpected cooling of UK inflation data in August due to a decline in fuel prices,which printed at 9.9% versus 10.1% the prior month. The new UK prime minister Liz Truss announced an emergency fiscal package of £2,500 ($2,881.90) for the next two years.
  • Crude oil climbed higher on supply concerns, along with a smaller stockpile build of 2.4 million barrels in the US inventories for the last week. The EU counties may have to increase the use of oil to heat the winter on the back of a supply crunch of Russia’s gas.
  • Gold extended losses due to high bond yields. Gold has been in divergence moves with the bond yields and the USD this year. Especially a spike in the short-dated bond yields continued to pressure the precious metal’s prices. But from a technical perspective, the gold price is not approaching key support of 1,680 in the spot markets.  

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