Asia markets are set to open lower but could be resilient as US stocks bounced off session lows despite a negative close overnight ahead of big tech earnings, with Netflix and Tesla to report first-quarter earnings this week
The US 10-year bond yield rose to a fresh three-year high, and oil rose for the fourth consecutive day on supply concerns amid Libya’s outage. EU, Australian, and New Zealand stock markets were closed for the Easter holiday. At the same time, the Chinese government imposed a new series of stimulus measures, to combat the economic impact of Covid lockdowns. Asia markets may also gain momentum on the policy.
SPI futures are 10 points higher, indicating a flat or slightly higher start on the S&P/ASX 200 in Australia. Energy sector stocks could continue to benefit from rising demand and high inflation, while the technology sector may face pressure. The upcoming election also weighs on the market’s sentiment. The NZX 50 dipped 0.2% at the open. Rising interest rates and high inflation are reducing investor confidence, with the benchmark index approaching a one-month low.
US stocks
Wall Street finished down but bounced off session lows after a choppy session. The Dow Jones Industrial Average slid 0.11%, the S&P 500 edged lower by 0.02%, and Nasdaq declined 0.14%.
Energy and financial stocks outperformed the other peers, up 1.51% and 0.61% respectively, suggesting investment funds are rotating to the cyclical stocks from the growth sectors ahead of the mega-caps earnings reports. The oil price extended gains, leading the major energy stocks higher. Occidental advanced more than 3%. Both Devon Energy and Chevron were up more than 1%.
US banks had a strong session on steepening bond yield curves, also led by Bank of America on a strong earnings report that beat analysts' estimates. The bank's shares jumped 3.6%. All of the other big lenders, including JPMorgan Chase, Wells Fargo, Citigroup, and Goldman Sachs were up between 1%-3%.
Growth stocks bounced off session lows and finished mixed, with most mega-caps closing in the green. Twitter's share price jumped more than 7% on Elon Musk's takeover offer. Tesla's shares also advanced 2%. Tesla’s CEO offered US$43 billion to buy out the social platform. Twitter’s board of directors issued a new rights plan aiming to block the attempt. Netflix was down near 1% ahead of its Q1 earnings report on Tuesday. Tesla’s earnings are due for release this Wednesday.
Treasuries
The US long-dated bond yields continued to rise, while the short-dated bond yields fell. The 10-year US Treasury yield surged to 2.86% on the expectation of a 50-basis points rate hike by the US Federal Reserve. The 2-year Treasury yield was slightly down to 2.45%. The bond yields curve reversed the inverted course after the Fed signaled it would start shrinking its balance sheet sooner and larger in size.
The Australian 5-year bond yields slightly rose to 2.7%. The New Zealand two-year swap steadied at 3.5%.
Commodities
Oil prices rose for the fourth trading day amid Libya’s production outage, along with the Ukraine crisis. The stimulus measures being imposed by Beijing also add to the moment as the Chinese banks are urged to ease the loan requirements to logistic businesses, along with support to truck drivers, which may lead to further rebounding of fuel demand.
WTI futures rose 1%, to US$107.36 per barrel, and Brent futures were up 1.22%, to US$113.06 per barrel. The natural gas price surged 6.42%, to US$7.76 per MMBtu amid ongoing sanctions on Russia.
The precious metal prices were up as safe-haven demands mount, but cut gains at the close as riskier assets bounced off session lows. The NYMEX gold futures rose US$5.4, to US$1,980.30 per ounce after hitting US$1,995 at the intraday high, and silver rose 1.26%, to US$25.95 per ounce after surging to US$26.18.
Currencies
The US dollar continued to rise in thin liquidity on Easter Monday, amid the Fed’s accelerating tightening monetary policy, with the odds for a 75-basis point rate hike in May rising to near 90%, according to the CME FedWatch Tool. The Eurodollar dipped 0.17% against the greenback to below 1.08, and the USD/JPY hit 127.00, a 20-year high.
Commodity currencies also fell against the US dollar, with both AUD and NZD down 0.6%, and 0.77% against the USD respectively. The Canadian dollar, however, holds strongly on the rising oil price and steadied at above 1.26.
Cryptocurrencies
Cryptocurrencies also bounced off session lows and finished mixed. Bitcoin is up 1.5%, to just above US$40,000, and ethereum dipped 0.35%, to just above US$3,000 in the last 24 hours. The optimism toward the crypto market was sparked by Grayscale Investments CEO Michael Sonnenshein’s comments on a possible launch of a bitcoin ETF, with the SEC approving an application for the Teucrium Bitcoin Futures ETF earlier this month.
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