Wall Street finished higher after a one-day drop as investors digested Fed's rate hike guidance and navigated mixed economic data. Despite the hawkish reiteration of future rate hike path by the Fed officials, market participants seem not to be convinced by more aggressive tightening measures. Either a 50 or 75 basis point will mark a peak of the Fed rate hike cycle, in turn pushing equity markets higher.
The recent rise in both equities and bonds indicates that investment funds were rotating amid a contraction in the business cycle since June. A rebound in commodities, such as oil and copper overnight, signals that the worst might be over as most companies provided positive outlooks for the second half.
ASX is set to open higher, while Chinese stocks under
The futures markets are pointing to a higher open in most of the APAC region, but the Chinese stocks were under pressure after Tencent reported the first quarterly decline.
ASX 200 is set to open higher as indicated by the futures price, up 0.33% overnight. Earnings optimism, a rebound in resource prices, and strong energy stocks may continue to push the benchmark index higher in today’s session. The strong employment data strengthens another 50-bps rate hike by the RBA in September, which could cushion the recent drop in the Australian dollar.
The NZX 50 fell 0.5% in the first half-hour of trading. Fisher & Paykel Healthcare plunged 8% after the company provided disappointing revenue guidance. The company expects the revenue will be approximately NZ$670 million for the first half of FY23, a decline from NZ$900million the same period for FY22.
Energy stocks rose for the second straight day on Wall Street
The Dow Jones Industrial Average was up 0.06%, the S&P 500 rose 0.24%, and Nasdaq advanced 0.21%.
Energy stocks resumed strong gains, with all the major oil producers, including Occidental, Devon Energy, and Exon Mobil, up between 2-6%. The growth sectors were mixed, with semiconductor stocks outperforming after Cisco reported strong earnings along with a positive outlook.
The US jobless claims fell to 250,000 from 252,000 in the week ended on 13 August, less than the estimate of 265,000. The Philly Fed Manufacturing Index for July rose to 6.2 from -12.3 the prior month. And Existing home sales fell 6%, to 4.81 million, the lowest seen in two years. Minneapolis Federal Reserve President Neel Kashkari said that he’s not sure whether raising interest rates to halt inflation will lead to a recession. The St. Louis Fed president James Bullard indicated to favor a 75 basis points rate hike in September.
The major companies’ performance overnight (19 August 2022)
Eurozone inflation reaches a record high of 8.9%
The Eurozone Consumer Price Index (CPI) for July rose to a record high of 8.9% from 8.6% the prior. The data shows that the core CPI excluding food, energy, alcohol, and tobacco rose to 4.0% from 3.7% in June. Along with a fresh 40-year high inflation in the UK that was released on Wednesday, the economic outlook is darkened further in the European countries with ongoing geopolitical tensions and energy crises.
The US dollar strengthens as Euro, and pound slumped, and commodity currencies were resilient
The US dollar continued to climb, with the dollar index up 0.88%, to 107.42. Both Eurodollar and the British pound slumped against the greenback due to darkened regional economic outlooks. The Eurodollar returned to a parity level with the US dollar. And GBP/USD fell to just above 1.19 at a one-month low.
Commodity currencies were also lower against the USD but showed more resilient moves due to a comeback in commodity prices, and the hawkish stance of the central banks.
Crude oil and copper were up as commodity markets priced in an economic cycle trough
Crude oil rebounded for the second straight trading day as commodity markets shrugged off recession fears while increasing demands sparked new concerns around supply issues. Despite a close call for the Iran new clear deal, obstacles remain, which may not be resolved in the time being.
The Nymex WTI futures rose 2.77%, to US$90.55 per barrel. The ICE Brent was up 3.11%, to US$96.56 per barrel.
Precious metals fell further due to a strong USD but industrial metals, such as copper rebounded. The COMEX gold futures fell 0.2%, to US$1,733 1 per ounce, and silver futures were down 1.5%, to US$19.45 per ounce, and copper rose 0.36%, to 3.65 per ounce.
Bond yields slipped as markets predicted a “Fed pivot”
The 10-year US Treasury yield fell to 2.886%, and the yield on the 2-year note slipped to 3.228%.
The UK 10-year gilt yield slid to 2.31%, and the German 10-year bund yield climbed to 1.10%,
The Australian 10-year government bond yield rose to 3.33%, and the yield on the 10-year New Zealand peer stayed at 3.50%.
Ethereum consolidated above 1,800
Ethereum bounced off the session low near 1,800, up 1.88%, to US$1,870in the last 24 hours. And bitcoin was flat at US$23,392.
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