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Selloff resumes on Wall Street due to risk-aversion, Asian markets are set to suffer

bear market

  • Growth sectors slumped on Wall Street on risk aversion

  •  Asian markets are set to open lower but Chinese stocks may be resilient

  •  EUR/USD fell below the parity level

  • Crude oil steadied above $90 per barrel, while natural gas hit a 14-year high

  • Bond yields jump to one-month highs as markets price in more aggressive rate hikes

  • Ethereum plunged 17% in one week

Wall Street posted the worst day since June amid a broad-based selloff due to risk aversion ahead of the Jackson Hole Symposium later this week when the Fed officials will provide clues to the future rate hike path. A jump in the bond yields suggests that market participants project a more aggressive interest increase in September. The 10-year Treasury yield rose to above 3%.

Asian markets are set to open lower but Chinese stocks may be resilient  

A surprising mortgage rate cut by the PBOC buoyed Chinese markets on Monday. The accommodative monetary policy may continue to support Chinese stocks ahead of the second-largest e-commerce, JD.com earnings report later today.

The NZX 50 fell 0.6% in the first half-hour of trading after a strong day on Monday. While the local positive earnings buoyed the benchmark index, the global headwind may continue to cap the gains.

ASX 200 futures were down 0.62%, pointing to a lower open. The growth sectors suffered from the global trend, with consumer discretionary stocks down nearly 2% yesterday. The Australian flash manufacturing and services PMIs for August will provide clues for how the economy performs.

Growth sectors slumped on Wall Street

The Dow Jones Industrial Average fell 1.9%, the S&P 500 slipped 2.15%, and Nasdaq slumped 2.57%.

All the 11 sectors in the S&P 500 finished in red, with growth stocks leading losses. All the mega-cap tech giants fell between 2-4%. The energy sector lost the least as crude oil prices stabilized after OPEC + hinted to cut production if needed.  

Zoom’s shares fell 8% after the company reported slower revenue growth of 8% from 12% a year ago, along with weaker-than-expected guidance.

The major companies’ performance overnight (23 August 2022)

Source: CMC Markets NG

The Eurodollar fell below the parity level against the greenback

The Eurozone dollar fell 1% against the US dollar to 0.9942, the lowest seen in December 2002. The energy crisis has sharply slowed down the region’s economic activities, with all the major countries’ manufacturing & service PMIs contracting since July, suggesting Eurozone’s economy might be heading to an imminent crisis.  

The US dollar strengthened to the highest level since 14 July on a jump in US bond yields, pushing down all the other major currencies. The British pound fell to the lowest level since March 2020.

In commodity currencies, the Aussie dollar was the most resilient, up 8 pips against the greenback due to strong performances in the resource and mining sectors.  

Crude oil prices stabilized at the recent low, while gas hit a 14-year high

Crude oil prices reversed early losses and finished at the session highs as supply woes outweighed recession fears after OPEC + hinted an output cut may be the option amid artificially pushing down on the futures’ prices in recent months. The Natural gas price soared to the highest seen in November 2008 on deteriorated supply outlook, given the intensifying geopolitical tension. The Russian energy company Gazprom announced that the major natural gas pipeline will shut down operation for three days at the end of the month.

The Nymex WTI futures fell 0.59%, to US$90.23 per barrel. The ICE Brent was up 0.11%, to US$96.83 per barrel. The Nymex Natural gas futures rose 3.68%, to US$9.68 per MMBtu.  

Precious metals continued to fall due to a strong US dollar, with Comex gold down 0.82% and Comex Silver falling 1.02%, to US$1,735.99 per ounce and US$18.98 per ounce, respectively.

Bond yields jump to one-month highs as markets price in more aggressive rate hikes

The 10-year US Treasury yield rose to 3.02%, and the yield on the 2-year note jump to 3.32%.

The UK 10-year gilt yield rose to 2.51%, and the German 10-year bund yield climbed to 1.30%,

The Australian 10-year government bond yield rose to 3.51%, and the yield on the 10-year New Zealand peer surged to 3.77%.

Ethereum plunged 17% in one week

Both bitcoin and Ethereum fell on the risk aversion trades, down 0.73% and 0.61% in the last 24 hours, respectively. However, the two leading cryptocurrencies slumped 12% and 17% in the last 7 days, following the selloff in the growth sectors on Wall Street.   

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