Wall Street fell sharply on Tuesday as the US CB consumer confidence for June fell to the lowest since 2013, suggesting rising rates and surging inflation deteriorated the household outlook, pointing to softening demands. This bleak economic backdrop sparked a renewed recession fear-led selloff in the US stocks, with the growth sectors leading the losses.
By contrast, China further eased the quarantine policy for international travelers, which fuelled the market rally in Asia. In addition, the commodity prices rebounded on China’s reopening optimism, with crude oil jumping 2%, and natural gas up 0.12%. However, the rebound in the energy prices again added to the inflationary worries, sending the broad equity futures lower.
AU and NZ day ahead
The S&P/ASX 200 is set to open lower as the SPI futures dropped 1.3%. The benchmark index rebounded for the fourth consecutive trading day on Tuesday. The rebound in resource and energy prices may provide a buffer to the broad selloff in the local markets. The Australian retail sales data for May will be in focus in today’s session.
The S&P/NZX 50 fell 0.4% in the first half-hour of trading, with A2 Milk, Auckland Airport, and heartland group leading losses. The energy companies opened higher by tracing the global markets.
The Dow Jones Industrial Average fell 1.56%, S&P 500 slashed 2%, and Nasdaq shed 2.98%.
The energy stocks again outperformed, while the growth sectors were shattered by economic concerns Occidental, Devon Energy, and Exxon Mobil all rose between 2-5%. However, all the mega-caps deepened losses, with Apple, Alphabet, and Microsoft all down 3%. Amazon, Tesla, and Meta platforms all sank 5%. Tesla has closed the California office, leading to a layoff of more than 200 staff. CEO Elon Musk indicated before that 10% of its workers were to be laid off due to a slowdown in the company’s growth.
The US CB consumer confidence for June printed at 98.7, revised down from 103.2 in May, lower than the estimate of 100. It is the lowest read since 2013, suggesting that household spending is under pressure due to the deteriorated economic outlook.
European stocks were higher on China’s optimism. The Stoxx 50 (+0.29%), FTSE 100 (+0.90%), DAX (+0.35%), CAC 40 (+0.64%).
Crude oil prices rose on China’s easing policy of Covid restrictions. The country reduced the quarantine time by half for international travelers, which boosted the demands outlooks. With OPEC + reluctant to further increase the Cartel’s output, the undersupply issues outweighed recession fears amid the upcoming summer season in the northern hemisphere.
WTI: US$111.76 (+2.00%), Brent: US$118.15 (+2.66%), Natural Gas: US$6.55 (+0.77%)
Gold slid on a strong USD, but the risk-off sentiment may provide further support to the precious metal prices.
COMEX Gold futures: US$1, 820.3 (+0.23%), COMEX Silver futures: US$20.80 (-1.49%), Copper futures: US$3.78 (+0.37%)
Agricultural products rebounded.
Wheat: US$936.00 (+2.02%), Soybean: US$1,462.50 (+2.08%), Corn: US$659.00 (+0.96%).
The US dollar index rose 0.6%, to 104.275, strengthened against most of the other currencies. USD/JPY topped 136 again as the Bank of Japan insists on YCC and an ultra-low interest rate. The rebound in commodity prices did not offer much support to the New Zealand dollar as ASB has given weak guidance to the currency due to the weak economic outlook. NZD/USD fell to 0.6240 at AEST 8:35 am. By contrast, the Australian dollar was more resilient to optimism about China’s reopening and the bounce in energy prices. the Canadian dollar has also taken a ride on the strong oil prices.
The US bond yields slid on the risk-off sentiment. But Europe bond yields rose broadly ahead of the Eurozone CPI data later today.
US 10-year: 3.17%, US 2-year: 3.112%.
Germany bund 10-year: 1.62%, UK gilt 10-year: 2.46%.
Australia 10-year: 3.73%, NZ 10-year: 3.93%.
The crypto markets fell, along with the broad selloff in the risk assets.
(See below prices at AEST 8:43 am according to Coinmarketcap.com)
Bitcoin: US$20,342 (-2.36%)
Ethereum: US$1,156 (-4%)
Cardano: US$0.4716 (-3.55%)
Disclaimer: CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information.