Wall Street slows sell-off despite weak economic data, Asian markets expected to open higher

uS shares retreated from session highs amid a string of weak economic data as investors awaited Fed officials to speak at the Jackson Hole symposium later this week. Now, a 50 or 75 basis point rate hike is a 50/50 chance when futures prices are tracked in CME Group’s FedWatch tool. The US 10-year bond yield stayed above 3% and the CBOE volatility index was at 24, suggesting investors remain cautious on the Fed’s monetary policy stance.

However, a deteriorating euro-zone economic outlook raises further concerns amid rising oil prices and a 14-year high natural gas price. Despite a surge in EUR/USD, the eurodollar remained at its lowest level against the US dollar since November 2002. And the single currency’s depreciation may be far from over due to high inflation and negative GDP growth, which marks a typical “stagflation” phase in the region.

Asian markets are expected to open higher

Most Asian futures markets are pointing to a higher open after the robust US session. China’s second-biggest e-commerce company JD.com’s second-quarter earnings beat analysts’ estimates, but it reported the slowest second-quarter revenue growth, up 5.4% annually, reflecting Covid lockdowns in Shanghai is, which led to a weakening of demand. With all Chinese tech stocks reporting weak performance in the second quarter, China’s economic recovery is clouding over despite Beijing’s efforts to boost confidence. But Chinese tech stocks may have an opportunity to rebound as most companies offered a better outlook for the second half of the year while regulatory measures against the sector were eased.

The NZX 50 fell 0.38% in the first half hour of trading. Heartland Bank shares plunged 12% after trading halted. The bank completed a NZ$130 million placement of the NZ$200 million equity raise at an offer of NZ$1.8 per share. Meridian Energy shares fell 3.7% at open after the company posted full-year 22 EBITDAF of NZ$709 million, or a 2.5% annual jump and a dividend of NZD 11.55 cents per share had reported.

ASX 200 futures were up 0.22%, suggesting a higher open. The energy sector should remain strong after outperforming on Wall Street.

Energy stocks outperformed on Wall Street

The Dow Jones Industrial Average fell 0.47%, the S&P 500 fell 0.22% and the Nasdaq was flat.

7 of the 11 sectors in the S&P ended lower, with healthcare and real estate leading the losses. Energy stocks outperformed on a jump in oil prices.

US flash services PMIs for August shrank to 44.1, the lowest since May 2020, and manufacturing PMIs fell to 51.3, the weakest since July 2020. July new home sales rose least since April 2016.

Zoom’s shares fell 15% after the company reported slower revenue growth of 8% versus 12% a year ago, along with a weaker-than-expected guidance.

The performance of the big companies overnight (24 August 2022)

Source: CMC Markets NG

US Dollar weakens as risk appetite recovers

The US dollar fell against the major G10 currencies as risk appetite appears to be recovering despite weak US economic data. Or ‘bad news’ will become ‘good news’ again as that increases the chances of a ‘Fed peak’ ahead of the key event later this week. Commodity currencies rallied strongly. The Australian dollar was the biggest gainer against the greenback, rising 0.77% to 0.6928 this morning. The New Zealand dollar rose 0.65% against the US dollar to 0.6215. Ann USD/CAD fell 0.76% to 1.2957.

Crude oil prices rose more than 3% on anticipation of an OPEC+ production cut

Broad commodities were higher on a fall in the US dollar. Oil prices rose to their highest level since August 12, when Saudi Arabia’s energy minister signed a commitment to cut production at any time. The rise in oil prices suggests that the recent Iran nuclear talks may not be an immediate bearish factor for oil markets. U.S. oil reserves fell to their lowest level since 1985. Both WTI and Brent futures were up more than 3% to $93.69 and $100.22 a barrel, respectively.

Comex gold futures rose 0.7% to $1,760 an ounce. Silver futures were up 0.7% to $19.08 an ounce.

US and EU bond yields were little changed, while Australian and New Zealand bond yields were higher

The 10-year US Treasury yield rose to 3.05% and the 2-year yield rose to 3.30%.

The UK 10-year gilt yield rose to 2.57% and the German 10-year Bund yield climbed to 1.31%.

The Australian 10-year government bond yield rose to 3.63% and the New Zealand 10-year bond yield rose to 3.84%.

Cryptocurrencies rally as yield risk

Both Bitcoin and Ethereum recovered from the sell-offs of the past few days. Bitcoin is up 1.39% to 21,485 and Ethereum is up 4.16% to 1,653 over the past 24 hours.

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