TWall Street’s rally took a breather as investors reassessed Fed policy and retail sales data overnight. The minutes of the Fed meeting did not provide clear guidance on the future rate hike path, although it did say it would not stop raising rates until inflation has returned to the 2% target level. According to the CME Fedwatch tool, the likelihood of a rate hike rose by 50 basis points in September after the meeting, suggesting that the pace of Fed tightening is expected to slow. However, a jump in bond yields created jitters in growth sectors, which enjoyed a five-day winning streak on Wall Street, with the S&P 500 retreating from key resistance at the 200-day moving average near 4,300.
Asian markets set for mixed opening, Tencent posts first quarterly revenue decline
Futures markets are pointing to a mixed open across APAC after a negative close on Wall Street.
The S&P/NZX 50 rose 0.17% in the first hour of trading. RBNZ’s 50 basis point rate hike failed to lift the Kiwi dollar amid global uncertainties. On the earnings front, shares in Auckland Airport fell 1.7% at the opening. The company posts its second full-year loss for fiscal 22, which ends June 30, but chairman Patrick Strange anticipates a profitable year in 2023, saying a strong recovery in the travel industry since the country’s borders reopened . The New Zealand flag airport reported an underlying net loss of NZ$11.6 million and an underlying net loss per share of NZ$0.8 cents, while its revenue rose 7% to NZ$300.3 million.
The ASX 200 is expected to open lower, futures price indicates, up 0.18% overnight. CSL’s disappointing earnings weighed on the healthcare sector, but consumer stocks offset losses on Wednesday. Australian wage growth fell short of estimates, raising concerns about the cost of living due to surging inflation. The Australian dollar collapsed against a worrying economic backdrop. Today’s payroll data is another key indicator for the economy, where a strong read could bolster the RBA to keep up with rate hikes.
Chinese stocks closed higher after primer, Ke-Qiang Li, urged to increase political support for the economy hit hard by Covid-19. Futures point to a higher opening in Hong Kong stock markets. Revenue at China’s largest company Tencent fell 3% year-on-year for the first time in the second quarter, driven by government measures against the gaming industry and Covid lockdowns in China. The tech giant’s share price is expected to fall at the opening, which could hurt other Chinese tech stocks.
Energy stocks rallied on Wall Street while growth sectors suffered
All three benchmark indices rallied from session lows despite a negative close. The Dow Jones Industrial Average fell 0.5%, the S&P 500 fell 0.72% and the Nasdaq fell 1.25%.
10 out of 11 sectors in the S&P 500 ended lower, with growth stocks leading losses, while energy was the only sector to finish higher on a rebound in oil prices.
Shares in most mega-cap companies fell, with Meta Platforms down 2.6% and Amazon down 1.8%. Apple’s shares rose 0.9% to $174.63, just 4% below their January all-time high. The iPhone maker announced it would be launching a new line of products on September 7th. The new iPhone 14 is expected to come with an improved camera and a faster chip.
Target’s weak earnings results took the shine off retailer stocks. The furniture giant’s quarterly profit plummeted 90% year over year on discounts on excess inventory. Shares of the company fell 2.7% after rebounding from a session low on improved forecasts for the second half.
Meme stocks generally lost momentum as risk appetite shrank along with the decline in tech stocks. Bed & Beyond was up more than 10% in the session but fell 15% in the extended hour as the SEC announced that RC Ventures was proposing to sell 9.45 million shares of the company’s stock.
On the economic front, US retail sales data were flat in July compared to the previous month. Core non-auto retail sales rose 0.4%.
The overnight performance of the big companies (18 August 2022)
Source: CMC Markets NG
UK inflation hits new 40-year high
Unlike the US, the UK’s CPI rose to 10.1% yoy in July thanks to an increase in food prices, despite a fall in oil prices. There is no expectation that inflation will cool off anytime soon, with the BOE forecast of 13.3% by October, encouraging more aggressive rate hikes by the central bank despite repeated warnings of a foreseeable economic recession.
Commodity currencies fell against the US dollar
A jump in US bond yields pushed the US Dollar Index up 0.14% on Wednesday. All commodity currencies fell sharply against the greenback as risk aversion increased across the board. The Japanese yen continued to weaken, with USD/JPY climbing above 135 to a weekly high. However, the Eurodollar was unchanged against the King Dollar.
Crude oil rallied amid a larger drop in US inventories
Crude oil rebounded after a three-day decline as US inventory data showed a withdrawal of 7.1 million barrels for the week ended August 12, far less than an estimate of 3 million barrels. Traders eyed a key level of support in oil prices while dismissing consumer concerns sparked by weak economic data out of China earlier this week. Nymex WTI futures were up 1.83% to $88.11 a barrel. ICE Brent was up 0.77% to $93.05 a barrel.
However, a strong US dollar sent metal prices lower. COMEX gold futures fell 0.73% to $1,776.70 an ounce, while silver fell 1.78% to $19.85 an ounce.
Bond yields rose in Fed meeting minutes
The 10-year US Treasury yield rose to 2.902% and the 2-year yield rose to 3.273%.
The 10-year UK Gilt yield rose to 2.90% and the German 10-year Bund yield climbed to 1.08%.
The Australian 10-year government bond yield was unchanged at 3.27% and the New Zealand 10-year bond yield rose to 3.50%.
Leading cryptocurrencies lost momentum
Both Bitcoin and Ethereum have been lower over the past 24 hours. Bitcoin was at 23,376 (-2.13%) and Ethereum was at 1,836 (-2.01%).
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