US stocks bounced off session lows and finished higher ahead of the Fed meeting later this week. While the US 10-year bond yield finishes at a 10-year high, the yield on the 2-year notes hits a fresh 15-year high, pointing to another heavy rate hike ahead. Fed is expected to raise the interest rate by 75 basis points at least on Thursday. Despite a jump in bond yields, the US dollar stayed flat, with the dollar index slightly down 0.14%, to 109.61.
- Dow was up 0.64%, the S&P 500 rose 0.69%, and Nasdaq advanced 0.76%. 9 out of the 11 sectors in the S&P 500 closed higher, with materials and consumer discretionary leading gains, while healthcare and real estate stocks were lower. Most mega-cap tech shares finished higher. Apple rose 2.72%, Meta Platforms was up 1.18%, and Tesla Motors climbed 1.95%. Ford’s shares dropped 5% in after-hours trading as the carmaker warned of an extra $1 billion in supply chain costs in the third quarter.
- China steps up cash injection by cutting its 14-day repo rate from 2.25% to 2.15%, injecting 12 billion yuan through both 7-day reverse repos and the 14-day tenor. The PBOC’s decision on its 1-year and 5-year loan prime rates will be on close watch today, but the bank may keep rates unchanged to stabilize the Yuan. China’s central bank faces the dilemma to boost a weak Yuan and a sluggish economy. USD/CNH closed just above 7 after hitting a day high of 7.0257. A breakout of the recent high of 7.04 may take the pair to hit 7.20, the highest level seen in May 2020.
- Most regional markets across Asia are set to open higher following the positive close on Wall Street and a rate cut in China. ASX futures were up 0.82%. Nikkei225 futures were flat and Hang Seng Index futures rose 0.64%. The RBA policy meeting minutes are to release at 11:30 am AEST today, when the reserve bank is likely to highlight concerns about economic growth, with a less hawkish stance in its monetary policy.
- Most major currencies reversed early losses against the US dollar as traders are awaiting clues from the Fed. EUR/USD rose for the fourth trading day, to just above the parity level, while USD/JPY was up slightly to 143.23 this morning. Commodity currencies, including AUD, CAD, and NZD all consolidated above the recent lows.
- Both gold and oil prices also bounced off day lows, finishing flat due to a pullback of the US dollar. As for crude markets, the Fed meeting may be overshadowing supply concerns, with the dollar’s movement becoming the main driver of oil prices.
- Bitcoin bounced off a fresh-two-year low. The largest market-cap token was flat at above 19,500 this morning after hitting a fresh 2-year low of under 18,300 on Monday, which makes the day-low of 18,232 a pivotal support.
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