Global bond yields, particularly in the Asian markets, jumped on the Bank of Japan’s decision to double its 10-year bond yield cap to 0.5% from 0.25% on Tuesday, causing a surge in the Japanese yen, and sending the other Asian currencies and stocks down, while pressuring the US dollar.
However, Wall Street was resilient after five-days of consecutive falls, as equities may have been oversold. The price action could suggest that US stocks are still on track for a Christmas rally. But risks remain, and the Bank of Japan-induced sell-off in global bonds may continue to send jitters to risk assets.
On the other hand, a softened US dollar lifted commodity prices, including gold and oil, but natural gas prices continued to slump after EU members agreed on a “dynamic” cap on the price. However, it's unknown how effective the price cap will be amid the cold winter.
- All three benchmarks bounced session lows and finished higher. 7 out of 11 sectors in the S&P 500 rose, with energy leading gains, up 1.5%. Consumer discretionary was the laggard, down 1.1% due to an accelerating slump in Tesla shares. Meta Platform’s stock outperformed major big techs, up 2.3%.
- Tesla shares accelerate their fall, down 8%, to below 140, a fresh year-low, a day after Elon Musk was voted out as Twitter’s CEO by users. However, the Tesla boss posted on Twitter that “there is no successor”.
- The Japanese yen soared 3.8% against the US dollar, with USD/JPY tumbling more than 500 points to just above 131.70, the lowest seen in August. The BoJ’s decision to ease its YCC control may mark an end of its ultra-loss monetary policy and cause a 15 basis point jump in the Japanese 10-year bond yield.
- Gold futures jumped as risk-off sentiment boosted haven assets. The bond market’s symmetric risk sparked a surge in demand for precious metals. But gold is in a bearish divergence move with some major indications from a technical perspective.
- Crude oil extended gains for the second day, as Saudi Arabia’s energy minister denied the critics for actions to reduce output in a news interview. US lawmakers also face challenges to passing sales of the US SPR, where the amount of oil reserve dropped to 380 million, the lowest level since 1984.
- Asian equity futures point to a higher open in both ASX and HKEX but a dip in Nikkei 225 as the sell-off in the Japanese bonds sank Japanese stock markets. ASX futures were up 0.83%, Nikkei 225 futures fell 0.75% and Hang Seng Index futures rose 0.12%.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.