Wall Street rallied on a broad-based rally after last week’s slump as the escalation in the Hamas-Israel war was limited, and the stock markets may have been oversold. The notable trend was that mega-cap tech shares rebounded broadly, leading to broad gains following a mixed bag of earnings results last week. Apple’s shares rose 1% after consolidating above the key support level of 170, ahead of the “Scary Fast” event and its quarterly earnings report on Friday (Asian time zone). By contrast, Tesla’s share slipped under 200, echoing its disappointing third-quarter earnings due to narrowed profit margin.
Another highlight of the US markets was that the US Treasury said it would borrow US$776 billion in the fourth quarter, slightly lower than expected after the government budget deficit surged to US$1.7 trillion. This suggests that higher for longer rate expectations may be impacting the government debt limit. The Fed is set to decide on the interest rate on Thursday. The US bond yields climbed, but the US dollar weakened as haven demands abated. Gold and oil all fell as a rotation move from safe destinations to risk assets.
In Asia, the Japanese Yen strengthened on the news that the BOJ may further lift the cap on its 10-year bond yield. The bank will announce its policy decision later today, which is a major event in the Asian session. Futures point to a mixed open across the region. ASX 200 futures were up 0.38%, Hang Seng Index futures fell 0.26%, and Nikkei 225 futures slid 0.31%.
Price movers:
- All 11 sectors in the S&P 500 finished higher, with Communication Services, leading gains, up 2.06%. Other growth sectors, such as Consumer Discretionary and Technology, were also strong, up 1.26% and 1.19%, respectively. The Energy sector was the laggard, up 0.31% due to a slide in oil prices.
- Tesla’s shares fell nearly 5% as key battery supplier, Panasonic Holdings, said its production suffered from a slowdown in high-end EVs in North America. The comments raised concerns about weakened demands in the sector amid high borrowing costs.
- Evergrande’s stocks tumbled more than 20% to 18.8 Hong Kong cents before paring losses as the Hong Kong High Court pushed back the hearing to address a winding-up petition.
- USD/JPY slumped on the news that the BOJ could further flex the control on its bond yield curve, likely allowing the 10-year bond yield to go above 1%. The 10-year JGB yield hit 0.89% on the news, the highest since July 2023.
- Crude oil slipped more than 3% as fears of an escalation of Hamas-Israel conflicts eased. Economic concerns again became a bearish factor ahead of the Fed decision this week.
Today’s agenda:
- ANZ Business Confidence for September
- China’s Manufacturing and Non-Manufacturing PMI
- BOJ policy meeting
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