The rally on Wall Street took a breather as investors re-assessed Fed policy and the retail sales data overnight. The Fed meeting minutes did not provide clear guidance for the future rate hike path, although it expressed not to stop raising interest until inflation is back to the target level of 2%. According to the CME Fedwatch Tool, the probability of a 50 basis point rate hike in September increased after the meeting, suggesting that a slowdown in the Fed’s tightening pace is expected. However, a jump in the bond yields sent jitters to the growth sectors, which snapped a five-day winning streak on Wall Street, with the S&P 500 pulling back from a key resistance at the 200-day moving average near 4,300.
Asian markets are set for a mixed opening, Tencent posts the first quarterly revenue decline
The futures markets are pointing to a mixed open across the APAC region following a negative close on Wall Street.
The S&P/NZX 50 rose 0.17% in the first hour of trading. RBNZ’s 50-basis-point rate hike did not lift the Kiwi dollar due to global uncertainties. On the earnings front, Auckland Airport’s shares fell 1.7% at the open. The company posts the second full-year loss for FY22 which ends on 30 June but the Chair Patrick Strange expects a profitable year in 2023 by saying a strong recovery in the travel industry since the country reopens its border. The NZ flag airport reported a net underlying loss of NZ$11.6 million and a net underlying loss per share of NZ0.8 cents, while its revenue rose 7% to NZ$300.3 million.
ASX 200 is set to open lower as indicated by the futures price, down 0.18% overnight. CSL’s disappointing earnings dragged on the healthcare sector but consumer stocks offset losses on Wednesday. Australian wage growth fell short of estimates, sparking concerns over cost-of-living on the back of flaring inflation. The Australian dollar slumped amid a worrisome economic backdrop. Today’s employment data is another key gauge for the national economy, in which a strong figure may strengthen RBA to keep its pace on rate hikes.
The Chinese stocks finished higher after Prime Minister, Ke-Qiang Li, urged to boost policy support to the badly affected economy by Covid-19. Futures are pointing to a higher open in Hong Kong stock markets. The largest Chinese company, Tencent’s second-quarter revenue declined for the first time, down 3% year on year, due to regulatory crackdown on the gaming industry and Covid lockdowns in China. A drop in the tech giant’s share price is expected at the opening, which may drag on other Chinese tech stocks.
Energy stocks rebounded on Wall Street while growth sectors were under pressure
All three benchmark indices bounced off session lows despite a negative close. The Dow Jones Industrial Average fell 0.5%, the S&P 500 was down 0.72%, and Nasdaq slipped 1.25%.
10 out of 11 sectors in the S&P 500 finished lower, with growth stocks leading losses, while energy was the only sector that closed higher due to a rebound in oil prices.
Most mega-cap companies’ shares fell, with Meta Platforms down 2.6% and Amazon sliding 1.8%. Apple’s shares rose 0.9%, to US$174.63, only 4% off its all-time high seen in January. The iPhone maker announced a plan to launch a new series of products on September 7. The new iPhone 14 is expected to integrate with an upgraded camera and a faster chip.
Target’s weak earnings result took the shine off retailer stocks. The furniture giant’s quarterly profit plunged 90% year on year due to discounts on excessive inventories. The company’s shares fell 2.7% after bouncing off a session low on better guidance for the second half.
Meme stocks lost steam in general as risk appetite shrank, along with tech shares’ fall. Bed & Beyond surged more than 10% in the session but fell 15% in the extended hour due to disclosure by the SEC that RC Ventures proposed selling 9.45 million shares of the company.
On the economic front, the US July retail sales data came flat compared to the previous month. The core retail sales, excluding automobiles, rose 0.4%.
The major companies’ performance overnight (18 August 2022)
UK inflation hits a fresh 40-year high
Unlike the US, the UK CPI jumped to 10.1% year on year in July, thanks to a surge in food prices, despite a drop in oil. There are no expectations for inflation to cool any time soon, with BOE’s forecast of 13.3% by October, which promotes more aggressive rate hikes by the central bank, although it repeatedly warns of a foreseeable economic recession.
Commodity currencies slumped against the US dollar
A jump in the US bond yields pushed the US dollar index higher, up 0.14% on Wednesday. All the commodity currencies fell sharply against the greenback as risk-off sentiment mounted across the board. The Japanese Yen weakened further, with USD/JPY rising to above 135 to a one-week high. However, the Eurodollar was flat against the king dollar.
Crude oil rebounded amid a larger draw in the US inventories
Crude oil rebounded after a three-day drop as the US inventory data shows a 7.1-million-barrel draw for the week ended August 12, far lower than an estimate of a build of 3 million. Traders eyed a key support level in the oil prices while shrugging off consumption concerns that were sparked by the Chinese weak economic data earlier this week. The Nymex WTI futures rose 1.83%, to US$88.11 per barrel. The ICE Brent was up 0.77%, to US$93.05 per barrel.
However, a strong US dollar sent metal prices lower. COMEX gold futures were down 0.73%, to US$1,776.70 per ounce, while silver slid 1.78%, to US$19.85 per ounce.
Bond yields climbed on the Fed meeting minutes
The 10-year US Treasury yield rose to 2.902%, and the yield on the 2-year note was up to 3.273%.
The UK 10-year gilt yield rose to 2.90%, and the German 10-year bund yield climbed to 1.08%,
The Australian 10-year government bond yield was flat at 3.27%, and the yield on the 10-year New Zealand peer rose to 3.50%.
Leading cryptocurrencies lost steam
Both bitcoin and Ethereum were lower in the last 24 hours. Bitcoin was at 23,376 (-2.13%), and Ethereum was at 1,836 (-2.01%).
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