WAll Street closed higher after a day’s decline as investors digested the Fed’s rate hike forecast and navigated mixed economic data. Despite Fed officials’ hawkish iteration of future rate hike path, market participants appear unconvinced of more aggressive tightening action. Either 50 or 75 basis points will mark a peak in the Fed’s rate hike cycle, which in turn will propel equity markets higher.
The recent surge in both stocks and bonds suggests that mutual funds have been rotating since June amid a contraction in the business cycle. An overnight rebound in commodities such as oil and copper signals the worst may be over as most companies gave positive outlooks for the second half of the year.
ASX expected to open higher while Chinese stocks are below
Futures markets are pointing to a higher open across most of the APAC region, but Chinese stocks were under pressure after Tencent reported its first quarterly decline.
The ASX 200 is expected to open higher, futures price indicates, up 0.33% overnight. Earnings optimism, a rebound in commodity prices and strong energy stocks could continue to push the benchmark index higher in today’s session. The strong payrolls data bolsters another 50 basis point interest rate hike by the RBA in September, which could cushion the Australian dollar’s recent slide.
The NZX 50 fell 0.5% in the first half hour of trading. Fisher & Paykel Healthcare fell 8% after the company issued disappointing sales guidance. The company expects sales of approximately NZ$670 million for the first half of FY23, down from NZ$900 million in the same period of FY22.
Energy stocks are up for the second straight day on Wall Street
The Dow Jones Industrial Average was up 0.06%, the S&P 500 was up 0.24% and the Nasdaq was up 0.21%.
Energy stocks posted strong gains again, with all major oil producers including Occidental, Devon Energy and Exon Mobil gaining between 2% and 6%. Growth sectors were mixed, with semiconductor stocks outperforming after Cisco reported strong earnings along with a positive outlook.
US jobless claims fell to 250k from 252k in the week ended August 13, down from the 265k estimate. The Philly Fed Manufacturing Index for July rose to 6.2 from -12.3 in the previous month. And existing home sales fell 6% to 4.81 million, the lowest in two years. Minneapolis Federal Reserve Chairman Neel Kashkari said he was unsure whether raising interest rates to curb inflation would lead to a recession. St. Louis Fed Chairman James Bullard indicated he would support a 75 basis point rate hike in September.
The overnight performance of the big companies (19 August 2022)
Source: CMC Markets NG
Eurozone inflation hits record high of 8.9%
The euro-zone consumer price index (CPI) rose to a record high of 8.9% in July from 8.6% a year earlier. Data shows that core CPI excluding food, energy, alcohol and tobacco rose to 4.0% from 3.7% in June. Coupled with a new 40-year high inflation rate in the UK released on Wednesday, ongoing geopolitical tensions and energy crises continue to cloud the economic outlook in European countries.
The US dollar is strengthening as the euro and pound slumped and commodity currencies were resilient
The US dollar continued to rise, with the dollar index rising 0.88% to 107.42. Both the eurodollar and sterling fell against the greenback on a clouded regional economic outlook. The Eurodollar returned to parity levels with the US Dollar. And GBP/USD fell to just above 1.19 for the month low.
Commodity currencies were also lower against the USD but showed more resilient moves on the back of a comeback in commodity prices and dovish central bank stance.
Crude oil and copper rose as commodity markets were trading at an economic cycle low
Crude oil rallied for a second straight trading day as commodity markets shrugged off recession fears, while rising demand sparked fresh concerns over supply issues. Despite a clear call for a new clear deal with Iran, obstacles remain that may not be resolved for now.
Nymex WTI futures were up 2.77% at $90.55 a barrel. ICE Brent is up 3.11% to $96.56 a barrel.
Precious metals continued to fall on a strong USD but base metals like copper rallied. COMEX gold futures fell 0.2% to $1,733 an ounce and silver futures fell 1.5% to $19.45 an ounce and copper was up 0.36% $3.65 an ounce.
Bond yields slipped as markets predicted a ‘Fed pivot’
The 10-year US Treasury yield fell to 2.886% and the 2-year yield slipped to 3.228%.
The UK 10-year gilt yield fell to 2.31% and the German 10-year Bund yield rose to 1.10%.
The Australian 10-year government bond yield rose to 3.33% and the New Zealand 10-year bond yield remained at 3.50%.
Ethereum consolidates above 1,800
Ethereum rebounded from session lows near $1,800, up 1.88% in the last 24 hours to $1,870. And bitcoin remained flat at $23,392.
How to trade in the financial markets
A guide to spread betting and CFD trading, with examples of different trading strategies and an introduction to the three pillars of trading.
Get this free report
Disclaimer: CMC Markets is an execution service provider only. The material (whether or not it contains opinions) is for general informational purposes only and does not take into account your personal circumstances or goals. Nothing contained in this material constitutes (or should be construed as such) financial, investment or other advice on which reliance should be placed. None of the opinions contained in this material constitute a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is appropriate for any particular person. The material has not been prepared in accordance with legal requirements promoting the independence of investment research. While we are not specifically prohibited from trading this material prior to making it available, we do not attempt to exploit the material prior to its distribution.
Comments are closed.