US stocks snapped a two-day losing streak amid ongoing earnings optimism and surprisingly strong economic data for July. The tech-heavy index, Nasdaq jumped 2.6%, supported by a surge in fintech shares and biotech after Paypal and Moderna reported strong earnings, up 9% and 16% respectively. Both US ISM services PMI and factory orders came in well above the consensus figures, suggesting that the economic trajectory is not as bad as previously projected. Friday’s job data will keep sentiment in check when a slowdown in employment is expected.
However, oil prices sank nearly 4% on a deteriorated demand outlook despite a plan for a modest output increase by the OPEC+, suggesting that the commodity futures continued to price in an inevitable economic recession.
Elsewhere, the Bank of England tipped to raise the interest rate by 50 basis points to curb 4-year high inflation, which will be the biggest increase in 27 years. However, the bank has been behind the yields curve as futures markets indicate the rate hike cycle might be soon coming to an end.
AU and NZ day ahead
The S&P/ASX 200 futures are up 0.47%, pointing to a higher open today. The benchmark index has rebounded 8%, to nearly the 7,000- mark, from the year low, led by a broad-based comeback in the global equity markets. While miners and energy stocks underperform the ASX 200, the recent bounce in the tech and financial sectors may continue to lift the local equity markets. The upcoming major banks’ earnings next week are to steer the local markets’ sentiment.
The S&P/NZX 50 rose 1.7% on Wednesday, led by energy and telecommunication stocks. The New Zealand equity market has been outperforming its Australian peer since mid of June due to more consistency in RBNZ’s monetary policy, which provides certainty to the local investors. Yesterday's disappointing employment data for the second quarter pressured the New Zealand dollar but strengthened odds for the RBNZ to slow down rate hikes, which further boosted investor sentiment.
US
The Dow Jones Industrial Average rose 1.28%, the S&P 500 was up 1.56%, and Nasdaq jumped 2.59%.
10 out of 11 sectors in the S&JP 500 finished higher. The growth stocks, including consumer discretionary, technology, and communication services, outperformed, while the energy stocks fell on a slump in oil prices on weakened demand outlooks. All the Mega-caps ended strongly, with Meta Platform up 5.4%, and Amazon gaining 4%.
On the earnings front, PayPal’s shares surged 16% due to a beat on earnings expectations. The fintech company announced a 15 billion share buyback program. Its share price has also been boosted by Elliot Management’s confirmation to hold a $2 billion stake. Moderna’s second-quarter earnings came strongly with a 9% growth in its revenue of US$4.7 billion, beating expectations of US$4.5 billion. The biotech company keeps its outlook for sales of US$21 billion unchanged in 2022.
The major companies’ performance overnight (04 August 2022)
Europe
The major European indices were also. The Stoxx 50 (+1.30%), FTSE 100 (+4.49%), DAX (+1.03%), CAC 40 (+0.97%). Read more
Commodities
Crude oil slumped on demand concerns, while both crude and gasoline showed a surprise build in the stockpiles. The crude inventory increased by 4.5 million barrels, well above the forecast of a draw of 600,000 barrels last week. Gasoline has also increased by 200,000 versus a 1.6 million drop in estimate. In general, the commodity markets are under pressure on a weakened demand outlook.
WTI: US$90.92 per barrel (-3.71%), Brent: US$97.16 per barrel (-3.36%), Natural Gas: US$8.27 per MMBtu (+7.27%)
COMEX Gold futures: US$1,782.1 per ounce (-0.425%), COMEX Silver futures: US$20.025 per ounce (-0.57%), Copper futures: US$3.48 per ounce (-1.17%)
Wheat: US$766.5 per bushel (-1.06%), Soybean: US$1,371.5 per bushel (-1.08%), Corn: US$595.5 per bushel (+0.21%).
Currencies
The US dollar index was flat on Wednesday, but USD/JPY picked up gains again, rising 0.5%, to nearly 134. The Australian dollar and Canadian dollar firmed against the greenback as equity’s rally fueled risk-on sentiment in commodity currencies. The British pound was flat despite an expected supersized rate hike by the BOE.
Treasuries
The US government bond yields were lower, while the EU notes were higher after the BOE hinted to raise interest rate by a 50 basis points. Australian and New Zealand’s bond yields also climbed. The divergence moves between the US and other regions’ bond yields may suggest that the US dollar’s strength will continue to diminish.
US 10-year: 2.70%, US 2-year: 3.07%.
Germany bund 10-year: 0.91%, UK gilt 10-year: 1.91%.
Australia 10-year: 3.08%, NZ 10-year: 3.34%.
Cryptocurrencies
The crypto markets were slightly lower in the last 24 hours as rebounding momentum seems to fade off this week.
(See below prices at AEST 9:55 am according to Coinmarketcap.com)
Bitcoin: US$22,987 (-0.61%)
Ethereum: US$1,621 (-1.72%)
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