Asian equity markets are expected to suffer from a broad selloff in both Europe and US stocks overnight ahead of the key US CPI data later today. The recent bullish bets faded on worsened global economic outlooks, with an expectation of ongoing sticky inflation and aggressive tightening measures taken by central banks. Following the RBA’s supersized rate hike, the ECB confirms to increase the interest rate by 25 basis points in July and one more in September, which will be the first-rate hike in more than a decade. In addition, Shanghai is expected to lock down part of the city due to renewed Covid outbreak, sending the Chinese stocks lower, along with drops in both oil and material prices, which intensified the broad-based selloff.
AU and NZ day ahead
ASX is set to open lower as the S&P/ASX 200 futures slid 0.78%. The two heavily weighted components, including financials and materials, sank more than 2% on Thursday and sent the benchmark index to a one-month at just above the 7,000-mark. The four big banks wiped out A$46 billion in market value on the RBA’s rate hike earlier this week. With the price falling in raw materials, the local markets may head lower to finish the week.
The S&P/NZX 50 was down 1% at the open, taking a hit by the global risk assets’ selloff. The recent rout in the bond markets also presses on the local equity markets, where the RBNZ’s runoff of its balance sheet starts next month. Bank stocks gapped down at the open due to the rate-hike shocks.
Here are some local equities’ updates. Air NZ upgrades the outlook, seeing a smaller FY22 loss of less than NZ$750 million vs. previously projection of less than $800 million. Vista Group names Movio’s Sarah Lewthwaite the new CEO. Chorus sees FY capital expenditure of NZ$480 million to NZ$500million.
US
The bear market has returned, with the S&P 500 finishing below one-week pivotal support at 4,100, and Nasdaq down under 12,000.
Dow Jones Industrial Average slid 1.94%, the S&P 500 fell 2.38%, and Nasdaq sank 2.75%.
All the 11 S&P 500 closed in red, with all mega-caps finishing lower. Meta Platform shed 6%, and Amazon fell 4%. The travel-related stocks were hit by flaring fuel prices, with both the Norwegian Cruise Line and Carnival slashing more than 9%.
Tesla’s shares initially jumped 3% on the news that the Shanghai output tripled in May despite the strict lockdowns but fell off a session high and down 0.89% at the close. The EV maker produced 33,544 cars in May or 50% of a normal capacity, but three times its production in April.
Europe
European stocks fell on the ECB’s rate-hike vows. The Stoxx 50 (-1.70%), FTSE 100 (-1.54%), DAX (-1.71%), CAC 40 (-1.40%). Read more
Commodities
Crude oil prices were slightly down on China’s plans to lock down part of Shanghai. But the crude price remains a 3-month high at above $120. The shortage of gasoline supply sparks new worries about increasing demands in peak summer. Lack of investment to the refinery and the ongoing war- disrupted supply chain will continue to elevate the oil prices.
WTI: US$121.35(-0.71%), Brent: US$123.07 (-0.41%), Natural Gas: US$8.97(-3.07%)
Precious metals were lower on Chinese economic concerns.
COMEX Gold futures: US$1, 850.5 (-0.124%), COMEX Silver futures: US$21.71 (-0.51%), Copper futures: US$4.36 (-0.015%)
Agricultural products were mostly up.
Wheat: US$1, 071.25 (-0.33%), Soybean: US$1,582.25 (+0.91%), Corn: US$716.75 (-0.14%).
Currencies
US dollar strengthened as bond yields stayed high. EUR/USD slumped on ECB’s plans of rate hikes and a downgrade of the region’s economic growth. USD/JPY steadied at above 134.
(See the below FX rates at EAST 8:26 am, Bloomberg)
US dollar index: 103.305 (+0.74%)
EUR/USD: 1.0615
GBP/USD: 1.2495
USD/JPY: 134.41
USD/CHF: 0.9803
USD/CAD: 1.2700
AUD/USD: 0.9097
NZD/USD: 0.6385
Treasuries
Bond yields continued to climb on inflation concerns.
US 10-year: 3.04%, US 2-year: 2.82%.
Germany bund 10-year: 1.42%, UK gilt 10-year: 2.32%.
Australia 10-year: 3.60%, NZ 10-year: 3.89%.
Cryptocurrencies
Leading cryptocurrencies were down, along with the broad risk assets’ selloff.
(See below prices at AEST 8:28 am according to Coinmarketcap.com)
Bitcoin: US$30,072 (- 0.81%)
Ethereum: US$1,791 (- 0.65%)
Cardano: US$0.6328 (-2.46%)
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