Wall Street's rally has taken a breather on the first trading day in August as a decline in the global manufacturing PMI data weighed on sentiment. The weak economic data sparked demand concerns in the commodity markets, with oil prices plunging 5% and copper down 1.23%. The growing odds for a Fed pivot dipped bond yields further and sent the USD lower, while the Japanese Yen strengthened to the highest seen on 17 June.
The manufacturing PMI data across the globe weakened further. The data across all the major EU economies contracted in July due to the ongoing energy crisis as the region is struggling to cope with a cold winter when the gas supply halts at the end of the year. China, Japan, and the US also reported downbeat figures. However, with weakened economic activities coming into sight, the equity markets are on the track to taking the policy tailwind amid a “Fed pause” scenario towards the end of the year, indicated by the futures markets.
AU and NZ day ahead
Both Australian and New Zealand equities finished strongly on Monday as Asian markets followed the US stocks’ gains last Friday. Also, both Aussie and Kiwi dollars strengthened against the US dollar further overnight amid a weakened prospect for the US Fed to keep its rate hike pace. The New Zealand dollar firmed against its peer as the local cash rate is still on the lead of the major central banks.
The S&P/ASX 200 is set to open lower as the futures are down 0.3%. The RBA’s rate decision is in focus today when the reserve bank is expected to raise the official cash rate by another 50 basis points to rein in decades-high inflation, which printed at 6.1% in the second quarter. The Australian government yields fell sharply ahead of the rate decision, with the yields on the 10-year notes sliding to the lowest since late April.
The S&P/NZX 50 opened on a back foot, down 0.41%.
The Dow Jones Industrial Average fell 0.17%, the S&P 500 declined 0.35%, and Nasdaq was down 0.25%.
The energy sector led to broad losses due to a sharp fall in oil prices, down 2%. Consumer stocks outperformed as Amazon's strong earnings supported the sector optimism, with consumer discretionary up 0.21%, and consumer staples rising 1.2%.
Boeing’s shares jumped 6% on the Federal Aviation Administration’s approval to resume deliveries of its 787 Dreamliner.
On the earnings front, Pinterest’s shares soared 22% in after-hours trading despite a miss on both earnings and revenue as Elliott Management confirmed that it is the top investor of the company.
The major companies’ performance overnight (02 August 2022)
Source: CMC Markets NG
The major European indices were slightly lower on weak manufacturing PMIs, but HSBC stocks jumped on a positive outlook. The Stoxx 50 (-0.04%), FTSE 100 (-0.13%), DAX (-0.03%), CAC 40 (-0.18%). Read more
Crude oil prices sharply fell on China’s weakening economic data. A growing likelihood for the OPEC+ to further pump up the output volume has also pressured the oil market. Copper has declined amid China’s growth concerns, while precious metals, such as gold and silver rose on falling bond yields. However, the natural gas price stayed elevated due to ongoing supply concerns.
WTI: US$93.89 per barrel (-4.80%), Brent: US$100.10 per barrel (-3.72%), Natural Gas: US$8.28 per MMBtu (+0.66%)
COMEX Gold futures: US$1,789.3 per ounce (+0.42%), COMEX Silver futures: US$20.34 per ounce (+0.68%), Copper futures: US$3.53 per ounce (-1.2%)
Wheat: US$800.25 per bushel (-0.93%), Soybean: US$1,406. 50 per bushel (-4.26%), Corn: US$609.75 per bushel (-1.65%).
The US dollar index fell for the fourth trading day, which pushed up all the other major currencies but the Canadian dollar. CAD was under pressure due to a sharp decline in oil prices. The USD/JPY fell 1.2%, to 131.66, the lowest since 17 June. The pair has retreated 6% from its peak of above 139 in mid-July. EUR/USD consolidated above the 20-day moving average for the third trading day, which is near-term technical support at 1.0155.
The global bond yields continued to fall amid concerns of an economic downturn. The yields on the US 10-year and 2-year notes stayed converted.
US 10-year: 2.59% US 2-year: 2.89%.
Germany bund 10-year: 0.77%, UK gilt 10-year: 1.80%.
Australia 10-year: 3.05%, NZ 10-year: 3.39%.
The crypto markets have also lost the upside momentum on Monday amid uncertainties.
(See below prices at AEST 8:03 am according to Coinmarketcap.com)
Bitcoin: US$23, 027 (-2.31%)
Ethereum: US$1,625 (-4.56%)
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.