Asian equity markets are expected to open at the back foot as US stocks snapped a two-day winning streak. Investors were concerned about the global economic downfall after the World Bank downgraded the growth outlook. The 10-year US bond yield climbed back to above 3%, and crude oil prices continued to rise towards a 3-month high at above $120 per barrel, which reignites inflation worries ahead of the US CPI data on Friday.
However, both Nikkei 225 and Hang Seng rose further, boosted by the stimulus policies of both countries. The Chinese tech companies jumped on the government’s approval of new game licenses, with Alibaba soring more than 14% at HKEX on Wednesday.
Elsewhere, the Eurodollar shows signs of strengthening ahead of the ECB meeting later today when the central bank is expected to start raising interest for the first time in 11 years. OECD cuts the global economic growth to 3% from 4.5%, following the World Bank’s outlook downgrade.
AU and NZ day ahead
The S&P/ASX 200 futures were down 0.76%, pointing to a lower open in ASX. The financial sector was heavily hit by the RBA’s supersize rate hike, with four big banks falling between 2-5% on Wednesday. However, the rest of the sectors have offset the losses, with energy and materials performing strongly by benefiting from the stagflation era. Rising rates could continue to press on the broad markets to send the index lower when the consumer demands slow.
The S&P/NZX 50 was flat at the open. The New Zealand dollar has been facing headwinds from economic uncertainty. Bank stocks may continue to be under pressure by RBA’s rate hikes. A rapid rise in interest rates has been shifting investment funds from lower-yield stock markets to cash and bonds. The RBNZ plans to start shrinking the balance sheet from July, intending to commence sales of NZ$5 billion per year, and let short-dated bonds mature.
The Dow Jones Industrial Average fell 0.81%, the S&P 500 slid 1.08%, and Nasdaq declined 0.73%.
Bank stocks fell on Credit Suisse's profit warning, while chipmaker's shares slid after Intel weakened the outlook for semiconductor demands. However, Credit Suisse’s shares initially dropped on the job cut news but recovered losses and jumped 7% on an acquisition call by State Street.
Energy outperformed on rising oil prices, which was the only sector in the S&P 500 that finished higher on Wednesday.
Big techs were mixed, with Apple, Microsoft, and Amazon down, while Meta Platforms, and Alphabet higher.
Crude oil prices hit a fresh 3-month high as the EIA inventory data shows that the gasoline supply fell 812,000 barrels vs. an expectation of a 1.08 million increase. China’s reopening continued to boost the demand optimism. The oil price could be heading to the peak of Mach at above $130 on a very tight supply market.
WTI: US$122.11(+2.26%), Brent: US$123.75 (+2.64%), Natural Gas: US$8.70(-6.39%)
Precious metals were little changed but bounced off session lows, despite a strong USD and rising bond yields.
COMEX Gold futures: US$1, 855.6 (+0.19%), COMEX Silver futures: US$22.07 (-0.49%), Copper futures: US$4.45 (+0.32%)
Agricultural products were mostly up.
Wheat: US$1, 074.75 (0.28%), Soybean: US$1,568.00 (+1.18%), Corn: US$717.75 (+0.53%).
USD/JPY continues to rise to above 134, a fresh 20-year high, while EUR/USD consolidated above the key support of 1.07 ahead of the ECB policy meeting later today. All the commodity currencies, including the Australian dollar, New Zealand dollar, and the Canadian dollar, were down against the USD.
(See the below FX rates at EAST 8:07 am, Bloomberg)
US dollar index: 102.55 (+0.23%)
Both US and EU bond yields rolled back to the recent highs again due to the global economic growth warnings by the OECD
US 10-year: 3.021%, US 2-year: 2.778%.
Germany bund 10-year: 1.349%, UK gilt 10-year: 2.244%.
Australia 10-year: 3.540%, NZ 10-year: 3.837%.
Leading cryptocurrencies fell as risk sentiment weakened. Notably, Cardano has been outperforming major digital coins since late May.
(See below prices at AEST 8:12am according to Coinmarketcap.com)
Bitcoin: US$30,376 (- 3.36%)
Ethereum: US$1,805 (- 2.00%)
Cardano: US$0.6522 (+4.49%)