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The US stock rout is set to send jitters to the Asian markets as inflation fears intensify

Bear markets

Asian equity markets are set to suffer from the US stocks’ turbulence overnight. Wall Street was rocked by renewed inflation fears after a three-day rebounding, making the worst daily drop in the US stocks since 2020. The selloff was triggered by slumps in consumer stocks as the furniture giant, Target's shares tumbles more than 25% due to a big miss on earnings expectations along with weak guidance. In addition, the UK’s April CPI data printed at a 40-year high of 9% year on year, sparking further concerns about the global economy. At the same time, government bonds and gold stabilized on mounting haven demands as risk-off sentiment prevails. The 10-year US Treasury yield fell to 2.88% from 2.89% the previous day.

AU and NZ day ahead

The S&P/ASX futures were down 1.76%, pointing to a higher open in the ASX. The local market finished strongly on Wednesday but maybe hit by the broad souring sentiment in today’s trading. AUD/USD dropped to 0.6960 due to a weaker-than-expected wage growth data, along with a strong USD, below the key support at 0.70. The April employment data will be in focus today.

NZX 50 was down 1.21% at the open. The global headwinds and local monetary tightening approach by the RBNZ continue to pressure the local equity markets. The government budget is in the spotlight today.  

Infratil’s shares dropped 0.5% at the open despite a strong earnings report for FY 2022. The company reported a net income of NZ$1.17 billion y/y, a dividend per share is 12 NZ cents, and forecast proportionate EBITAF from NZ$510 million to NZ$550 million for 2023.

Goodman Property forecast cash distribution per share for 2023 of about NZ 5.9 cents.  

US

The Dow Jones Industrial Average fell 3.56%, the S&P 500 tumbled 4.03%, and Nasdaq slumped 4.73%.

Sector performance

All the 11 sectors in the S&P 500 fell, with consumer stocks leading broad losses as a slew of retailers, including Walmart and Target addressed that rising inflation and supply-chain disruptions pressure their future outlooks, causing valuation downgrade amid the microeconomic hardships.

Biggest losers: Consumer Discretionary (-6.6%), Consumer Staples (-6.38%), Technology (-4.74%).

The other sections: Industrials (-3.75%), Communication services (-3.41%), Real estate (-2.95%), Financials (-2.8%), Energy (-2.75%), Healthcare (-2.6%), Utilities (-1.03%).

Stocks performance

Megacaps: Amazon (-7.11%), Tesla (-6.83%), Nvidia (-6.76%), Apple (-5.66%), Microsoft (-4.74%), Alphabet (-3.9%), Meta Platforms Inc. (-5.11%), Netflix Inc (-6.96%).

Consumer stocks: Walmart (-6.79%), Target (-24.93%), Costco (-12.45%), Coca-Cola (-6.96%), Pepsi (-6.20%), The P&G (-6.23%).

Company earnings

Target (NYSE: TGT)

EPS: US$2.19 vs. US$3.07 est. Revenue US$25.17 billion vs. US$24.49 billion. The company says supply chain disruption and higher fuel costs will continue negatively affect its business in the current year and beyond

Cisco (NASDAQ: CSCO)

EPS: US 87 cents vs. 86 cents est. Revenue Su$12.84 billion vs. $13.34 billion. The company’s shares plunged 17% in the after-hours trading on a miss of the revenue expectation and weak second-quarter guidance due to China’s lockdown and the Ukraine war.

Tencent (HKG: 0700)

Sales growth is at 0.1%, or 135.5 billion yuan (US$20.1 billion), and its net income is down 51% to 23.4 billion yuan. The Chinese tech giant indicated a gradual recovery from the impact of the regulatory crackdown and China’s lockdowns.

EU

The broad European stock markets fell on recession fears. The Stoxx 50 (-1.36%), FTSE 100 (-1.07%), DAX (-1.26%), CAC 40 (-1.20%). Read more

Commodities

Crude oil prices fell due to the broad selloff in the equity markets on renewed recession fears as weak consumer stocks earnings and outlook weigh on sentiment. The macroeconomic negatives overwhelmed positive EIA data, which shows a greater-than-expected drawdown in the US inventory.  

WTI: US$109.59 (-2.50%), Brent: US$109.10 (-2.53%), Natural Gas: US$8.37 (+0.77%).

Precious metals consolidated on risk-off sentiment as the broad risk assets were sharply sold off.

Spot Gold: US$1,816. 66 (+0.08%), Spot Silver: US$21.41 (-0.22%).

Algaculture products were lower following the broad selloff in risk assets.   

Wheat: US$1,230.75(-3.66%), Soybean: US$1,662.75 (-0.91%), Corn: US$781.50 (-2.40%).

Currencies

US dollar rose against most of the other major currencies but the Japanese Yen as safety demands promote fund inflow to the haven currencies. The US dollar index snapped a three-day losing streak, up 0.53%, to 103.95, while USD/JPY slid 0.92%, to 128.30. The commodity currencies were all weakened against the USD on falling export prices.

(See the below FX rates at EAST 7:48 am, CMC Markets)

EUR/USD: 1.046.

GBP/USD: 1.2338

USD/JPY: 128.29

USD/CHF: 0.9872

USD/CAD: 1.2887

AUD/USD: 0.6953

NZD/USD: 0.6290

Treasuries

Bonds yields slid on haven demands.

US 10-year: 2.884%, US 2-year: 2.667%.

Germany bund 10-year: 1.025%, UK gilt 10-year: 1.861%.

Australia 10-year: 3.455%, NZ 10-year: 3.525%.

Cryptocurrencies

The leading cryptocurrencies fell in the last 24 hours as digital coins have a positive correlation with risk assets. The whole market cap fell 4.20%, to US$1.25 trillion, a significant drop from above US$2 trillion two weeks ago. The stablecoin, Tether stabilized at 0.9987 despite a US$7 billion wipe-out from its supply, while the rival token, TerraUSD, fell further, down 10%, to 0.000017 after a systematic collapse last week.

Bitcoin: $29,218 (-4.46%)

Ethereum: $1,960 (-5.93%)


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.

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