Wall Street ran off a session high and finished lower due to surged bond yields after the BOJ said it might discuss tweaking its yield curve control. The central bank will hold a policy meeting later this afternoon. While an ongoing ultra-loose monetary policy is widely expected, it may loosen its control on the 10-year Japanese Government Bond (JGB) yield, where the cap is set at 0.5%. A higher cap on the JGB means the BOJ would provide less liquidity to the markets and may cause a further selloff in bonds. The Japanese Yen sharply strengthened, and the US 10-year bond yield surged 15 basis points to above 4%. Despite strong earnings reports from big tech recently, macro shocks again dominated the market’s movements on Thursday.
Sentiment soured amid the bond jitter, with the fear gauge, the VIX spiking 9% to 14.4. The US dollar weakened against the Japanese Yen but strengthened against most other currencies. Gold was hit by a strong dollar, while oil futures continued to climb, complicating the inflation outlook. On the economic front, the US second-quarter advance GDP unexpectedly picked up growth, printing at 2.4%, up from 2.0% in the first quarter, adding to the optimism for a soft-landing economy. However, this could encourage the Fed to hold the interest rate at a high level for a longer time.
Asian markets are set to open lower. The ASX 200 futures were down 0.59%, Hang Seng Index futures fell 1.65%, and Nikkei 225 futures slid 1.06%.
- 9 out of 11 sectors finished lower in the S&P 500, with Real Estate, Utilities, and Financials leading losses, down 2.12%, 1.73%, and 1.29%, respectively. Communication Services was the only sector that ended in the green, up 0.85%, boosted by Meta Platforms. The social media giant’s shares rose more than 4% amid strong earnings reports.
- Intel’s shares jumped 7% as the chipmaker’s second-quarter earnings returned to profitability after two straight quarterly losses. The company’s earnings per share was US$0.13, and analysts expected a loss of US$0.03. The revenue was US$12.9 billion, topping an estimated US$12.13 billion.
- Ford’s shares fell slightly despite positive quarterly earnings results. Ford’s earnings per share came at US$0.72, higher than an estimated US$0.55. The Automotive revenue was US$42.43 billion, beating the US$40.38 billion expected. Ford increased its full-year adjusted earnings guidance to between US$11 billion and US$12 billion from between US$9 billion and US$11 billion.
- The Eurodollar plunged, with EUR/USD down 1% to under 1.1, following ECB’s 25 basis points rate hike as the bank signalled the hiking cycle may be near an end, though “Future decisions will ensure that the key ECB interest rates will be set at sufficiently restrictive levels for as long as necessary.”
ASX and NZX announcements/news:
- Sky Network Television Limited (NZX/ASX: SKT will report its financial results for the year ending 30 June 2022 on 24 August 2023.
- BOJ policy meeting
- US PCE for June
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