Asian markets are expected to take the tailwind from the overnight US session as Wall Street gained substantially amid dip-buys into growth stocks despite Microsoft’s revenue downgrade. The rally was triggered by a decision for an oil output increase by OPEC+. The alliance decided to raise production by 648,000 barrels per day in the next two months, 50% more than the current pace of 430,000 barrels, suggesting that the undersupply-intensified inflationary pressure may get alleviated. The US non-farm payroll data for May will be in the spotlight, which is due for a release one hour before the US market opens on Friday. It might be positive news for the broad sentiment, should the data show a slowdown in hiring, making a “Fed pause” more possible in September.
AU and NZ day ahead
The S&P/ASX 200 futures rose 1.07%, pointing to a higher open in ASX. The local benchmark index fell for the last two trading days as growth concerns weighed. The Australian bond yields continued to climb ahead of the RBA cash rate decision next week when the reserve bank is expected to raise interest rate for the second time in a row. Today’s economic focus will be the April home loan data.
Westfield is in talks with Pacific Retails Capital to sell its Florida property as the company seeks to reduce its US Portfolio.
The S&P/NZX 50 rose 0.37% in the first half-hour of trading. The New Zealand dollar strengthened against the USD as broad risk assets rose sharply in the US session. The strong local bond yields also support a strong Kiwi dollar. 81% of house buyers expect interest rates will increase in the next 12 months, the highest in 26 years, according to a survey by ASB bank.
Fonterra’s shares dropped 3%, to NZ$2.99 at the open after a 5-day spike in price, while A2 milk rose 1%, to NZ$5.30.
US
The broad markets initially fell on the news that Microsoft lowered the profit and revenue expectations for the fourth quarter as a strong US dollar hurts foreign revenue, but reversed losses and finished strongly amid dip-buys.
The Dow Jones Industrial Average was up 1.3%, the S&P 500 rose 1.84%, and Nasdaq jumped 2.69%.
Growth sectors, including consumer discretionary, technology, and communication services, were all up more than 2%. All the mega-caps finished higher, with Meta up 5.5%, Tesla rising 4.7%, and Nvidia jumping 7%.
However, there were no positive sights on the economic front. While the ADP job data indicates a slowdown in hiring, the Fed’s Vice Chair, Lael Brainard, does not see a pause in rate hikes in September, insisting on a 2% target of inflation. Investors will be eyeing the non-farm payroll data later today when softening employment data is expected.
Europe
European stocks were mixed. The Stoxx 50 (+0.95%), FTSE 100 (-0.98%), DAX (+1.01%), CAC 40 (+1.27%).
Commodities
Crude oil prices reversed early losses and finished higher despite plans for an output increase by the OPEC +. The gain was supported by a more than expected crude inventory drawdown of 5.07 million, the most since mid-April, indicating increasing demands ahead of the summer season. However, the turnaround of Saudi Arabic may provide a material impact on the oil markets, capping a recent surge in prices.
WTI: US$115.26 (+0.51%), Brent: US$115.83 (+0.20%), Natural Gas: US$8.70 (+0.55%)
Precious metals jumped as the US dollar fell, while bond yields paused climbing.
COMEX Gold futures: US$1, 872 (+1.27%), COMEX Silver futures: US$22.34 (+1.94%)
Agricultural products were mixed.
Wheat: US$1,058.25 (+1.63%), Soybean: US$1,729.25 (+2.31%), Corn: US$730.25 (-0.14%).
Currencies
US dollar slid on risk-on sentiments and a pause in bond yield spikes. The US dollar index fell 0.75%, to 101.76. All the other major currencies strengthened against the greenback. EUR/USD had a major bullish break out at the pivotal resistance at 1.07, heading to the next short-term target at 1.0780. Commodity currencies all jumped against the US dollar, with New Zealand dollar, Australian dollar, and Canadian dollar, all reaching more than one-month highs.
(See the below FX rates at EAST 7:48 am, Bloomberg)
US dollar index: 102.58 (+0.80%)
EUR/USD: 1.0747
GBP/USD: 1.2576
USD/JPY: 129.86
USD/CHF: 0.9571
USD/CAD: 1.2571
AUD/USD: 0.7263
NZD/USD: 0.6555
Treasuries
US bond yields paused gains, but Australia and New Zealand bond yields climbed.
US 10-year: 2.908%, US 2-year: 2.632%.
Germany bund 10-year: 1.232%, UK gilt 10-year: 2.153%.
Australia 10-year: 3.495%, NZ 10-year: 3.670%.
Cryptocurrencies
Cryptocurrencies rebounded along with risk assets.
(See below prices at AEST 7.51 am according to Coinmarketcap.com)
Bitcoin: US$20,306 (+2.10%)
Ethereum: US$1,827.32 (+1.46%)
Cardano: US$0.5846 (+7.09%)
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