WAll Street ended mixed after Fed Chair Jerome Powell reiterated at the ECB’s central bank forum that he would maintain the rate hike path to fight inflation. Meanwhile, the final reading of US Q1 GDP was revised down to -1.6% from the previous -1.5%, while the GDP deflator jumped to a record high of 8.3%, marking a imminent sharp slowdown in US economic growth indicates recession fears.
Bond yields fell further as oil prices plunged from weekly highs. The fear indicator VIX stayed at 28.13, suggesting that risk sentiment is recovering somewhat from the recent broad sell-off.
AU and NZ day ahead
Both the Australian dollar and the Kiwi dollar fell to 0.6882 and 0.6226 against the US dollar this morning as negative US GDP data and central banks’ determination to contain inflation through aggressive rate hikes fueled renewed recession fears triggered, along with the recent weakening of commodity prices.
The S&P/ASX 200 will open slightly lower as indicated by futures markets. The benchmark index fell 0.9% on Wednesday, or 10% year-to-date. Soaring inflation and the RBA’s tightening turn on monetary policy weighed on the economic outlook. Technology, financials, energy & mining and materials led the overall losses, all of which fell more than 10% in June. In today’s session, energy stocks will fall by tracking the US markets overnight.
The S&P/NZX 50 fell 0.23% in the first half hour of trading, with Vector, Auckland Internationals Airport and F&P Healthcare leading the losses. Skellerup Holdings, Air NZ and Pushpay are among the Open’s biggest winners. Remarkably, shares in manufacturer Skellerup are up 20% to NZ$5.37 this morning from their June 15 low, helped by strong growth prospects for sales growth.
US
The Dow Jones Industrial Average rose 0.25%, the S&P 500 fell 0.07% and the Nasdaq slipped 0.03%. Aside from the Fed Chair’s speech, FOMC voting member Cleveland President Loretta Mester also hinted at a 75 basis point rate hike in July if high inflation persists.
The defensive and growth sectors outperformed while energy stocks fell. The big energy producers, including Occidental, Devon Energy and Exxon Mobil, all fell between 3% and 6%. Mega caps were mostly higher, with Apple, Amazon, Microsoft and Meta Platforms up between 1-2%. Tesla shares fell 1.8% after the electric vehicle maker laid off more than 200 employees at its California plant. Semiconductor stocks suffered on a valuation downgrade, with Nvidia falling 2.8%.
Europe
European stocks slid on comments from ECB members about the strong prospect of faster rate hikes to curb inflation. Inflation in the euro zone is expected to rise to 6.8% this year. Spanish inflation topped 10% in June, the highest since 1985. But the German state of North Rhine-Westphalia fell unexpectedly.
In addition, the NATO summit reached an agreement to admit Sweden and Finland as members due to their support from Turkey.
Stoxx 50 (-0.99%), FTSE 100 (-0.15%), DAX (-1.73%), CAC 40 (-0.90%).
raw materials
Crude oil prices slid as EIA data shows petroleum inventories rose 2.6 million in the two-week period ended June 24 despite a fall in crude inventories. Recently, aggressive central bank rate hikes and a slowdown in global economic growth have put pressure on commodity markets. Bets on a further release of US oil reserves and an increase in oil production by OPEC also dampened the oil market’s bullish momentum.
WTI: $109.78 (-1.98%), Brent: $115.78 (-2.20%), Natural Gas: $6.50 (+0.07%)
Gold futures consolidated above $1,810 an ounce. The base metal has been range-bound. On the one hand, risk-off sentiment supports the stable moves, on the other hand, a strong USD and high bond yields have dampened the upside.
COMEX Gold Futures: $1,819.5 (+0.11%), COMEX Silver Futures: $20.73 (-0.01%), Copper Futures: $3.77 (+0.00% )
Agricultural products recovered.
Wheat: $930 (-0.64%), Soybeans: $1,478.25 (+1.08%), Corn: $653.75 (-0.83%).
currencies
The US dollar index rose 0.6% to 104.865 as recession fears boosted demand for havens. USD/JPY continued to climb to a fresh 24-year high at 136.60 amid extreme monetary policy divergence. The Eurodollar fell on comments from ECB President Lagarde. EUR/USD fell to 1.0440 by 8:45 AEST and could head for June lows at 1.0360. Commodity currencies slipped on risk-off trades. However, the Swiss franc strengthened against the greenback, which was seen as a safe haven currency following the SNB’s surprise rate hike earlier this month.
treasuries
US bond yields continued to fall.
10-year US bonds: 3.09%, 2-year US bonds: 3.04%.
10-year German Bunds: 1.51%, 10-year UK Gilts: 2.38%.
Australia 10 years: 3.69%, New Zealand 10 years: 3.88%.
cryptocurrencies
Crypto markets slipped slightly over the past 24 hours, but recent moves have stabilized despite negative news in the crypto world. According to CNBC, cryptocurrency hedge fund Three Arrows Capital has gone into liquidation. And crypto exchange CoinFlex will not lift the withdrawal freeze imposed on June 23.
(See below prices at AEST 8:38am according to Coinmarketcap.com)
Bitcoin: $20,171 (-0.85%)
Ethereum: $1,107 (-4.23%)
Cardano: $0.4662 (-1.17%)
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