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US stocks fall on Powell's pledge to pin down inflation, bond yields jump, oil reclaims $110, gold higher

Jerome Powell

Asia equity market futures are predominantly in the green despite US stocks snapping a four-day winning streak after the Fed's Chair Jerome Powell hinted that a half percentage rate hike might be on the table to curb inflation. Oil prices resumed gains amid the ongoing Ukraine-Russia war, which also strains the stock markets’ rebound.

SPI futures are up 1.1%, indicating a big jump at the open of trade for the S&P/ASX 200 in Australia. The yield on the Australian 10-year bond gained 13 basis points to 2.7% Tuesday morning, its highest level since 2018 amid a global bond sell-off. The NZX 50 is down 15 points in the first hour.

US and EU stocks

The Dow Jones Industrial Average fell 0.61%, the S&P 500 slid 0.04%, and Nasdaq declined 0.4%.

The growth stocks were hit by the jumping bond yields after Powell's hawkish comments, with both consumer discretionary and technology sectors down more than 1%. Mega cap companies finished mixed. Meta Platforms were down 2.3%, and Microsoft dipped 0.42%. Apple and Tesla were higher. The major supplier to Apple, Foxconn said the plant resumed almost full capacity of operation after suspension last week due to Covid-induced lockdown in Shenzhen, China.

The airlines also took losses in the session on the rising oil prices. The major carriers, including Delta Airlines and United Airlines, were down 4.2% and 3.5% respectively. Boeing's shares dropped more than 3% after its China Eastern Airlines Boeing 737 passenger plane crashed in western China.

The energy stocks soared as oil prices resumed gains. Occidental jumped more than 8%, Devon Energy was up 5.3%, and Exxon Mobil rose 4.7%. 

European stocks mostly finished lower, with Euro Stoxx 50 down 0.53%, DAX falling 0.60%, and CAC 40 sliding 0.57%. The FTSE 100 climbed 0.51%.

Treasuries

The Fed Chair’s comments pushed US bond yields to rise to fresh highs in nearly 3 years. The 10-year US Treasury yield jumped to 2.30%. The 2-year Treasury yield surged to 2.12%, which is the first time the short-term dated bond yield crossed the 2%-mark since May 2019. The spreads between the 10-year and 2-year bond yields, which is the key indicator to gauge the economic outlook, narrowed further, reaching a possible recession level.

Germany 10-year Bond Yield went up to 0.46%, and the France 10-year Bond Yield rose to 0.92%. The UK 10-year Gilt yield was down to 1.64%.

Commodities

Oil prices jumped for the third straight session on news that the US’s EU allies considered joining the embargo on Russia’s oil export. The ongoing war between Russia and Ukraine also keeps the oil price rising.

WTI surged 7.46%, to US$112.50 per barrel, and Brent crude was up 8.09%, to US$116.65 per barrel.

Gold futures also advanced, supported by risk-off sentiment, up US$6, to US$1,935.75 per ounce. Silver rose 1.21%, to US$25.39 per ounce.

Currencies

Powell’s hawkish reiteration on the monetary guidance strengthened the US dollar. USD advanced against most of the major currencies except the Canadian dollar due to strong oil prices. The USD/CAD pair dipped 22 points, down for the fourth straight trading day. EUR/USD fell 0.32%, testing the key support level at 1.10. 

Cryptocurrencies

The global crypto market cap increased 0.61%, to $1.87 trillion in the last 24 hours. The major cryptocurrencies were mixed, with Bitcoin down 0.26%, to just above US$41,000, and Ethereum up 1.53%, to above US$2,900, XRP rising 4.4%, to US$0.8378. 


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