Wall Street slows selling despite weak economic data, Asian markets set to open higher


youS shares fell from session highs amid a flurry of weak economic data as investors awaited Fed officials’ speeches at the Jackson Hole Symposium later this week. Now, a rate hike of 50 or 75 basis points is a 50/50 chance per the price of futures on CME Group’s FedWatch tool. The yield on US 10-year bonds remained above 3% and the CBOE Volatility Index was at 24, suggesting that investor caution remained elevated towards the Fed’s policy path.

However, a deterioration in the economic outlook for the Eurozone is raising more concerns amid soaring oil prices and 14-year high natural gas prices. Despite a rise in EUR/USD, the Eurodollar remains at the lowest level against the US dollar since November 2002. And the devaluation of the single currency may be far from over due to high inflation and negative GDP growth, which marks a typical phase of “stagflation” in the region.

Asian markets set to open higher

Most Asian futures are pointing to a higher open after the resilient US session. China’s second-largest e-commerce company, JD.com, second-quarter earnings beat analysts’ estimates but posted the slowest revenue growth in the second quarter, up 5.4% year-on-year, due to the covid shutdowns in Shanghai which led to weaker demand. With all Chinese tech stocks posting weak performance in the second quarter, China’s economic recovery is getting murkier, despite Beijing’s efforts to bolster confidence. But Chinese tech stocks could have an opportunity to rebound as most companies provided better prospects for the second half of the year, along with an easing of regulatory clampdown on the sector.

The NZX 50 fell 0.38% in the first half hour of trading. Heartland Bank shares plunged 12% after trading halted. The bank made a placement of NZ$130 million on the NZ$200 million capital increase, with an offer of NZ$1.8 per share. Meridian Energy shares fell 3.7% on the open after the company reported FY22 EBITDAF of NZ$709 million, a jump of 2.5% a year, with a dividend of 11.55 New Zealand cents per share.

ASX 200 futures rose 0.22%, indicating a higher open. The energy sector should remain strong after Wall Street’s outperformance.

Energy stocks outperformed on Wall Street

The Dow Jones Industrial Average fell 0.47%, the S&P 500 fell 0.22% and the Nasdaq was flat.

Seven of the S&P’s 11 sectors ended lower, with health care and real estate leading the losses. Energy stocks outperformed on a jump in oil prices.

The flash U.S. services PMI for August contracted to 44.1, the lowest since May 2020, and the manufacturing PMI fell to 51.3, the weakest since July 2020. New home sales for July the least increase since April 2016.

Zoom shares fell 15% after the company reported slower revenue growth of 8% from 12% a year ago, as well as weaker-than-expected guidance.

The performance of large companies overnight (August 24, 2022)

Source: CMC Markets NG

US dollar weakens as risk appetite recovers

The US dollar depreciated against the major G10 currencies as risk appetite appeared to recover despite weak economic data in the US. Or ‘bad news’ becomes ‘good news’ again, as it bolsters the odds of a ‘Fed peak’ ahead of the key event later this week. Commodity currencies rebounded strongly. The Aussie dollar jumped the most against the greenback, up 0.77% to 0.6928 this morning. The New Zealand dollar gained 0.65% against the US dollar to 0.6215. Ann USD/CAD fell 0.76% to 1.2957.

Crude oil prices rose more than 3% on expectations of an OPEC+ production cut

Broader commodities rose on a weaker US dollar. Oil prices hit their highest level since Aug. 12 as Saudi Arabia’s energy minister signed on to cut production at any time. The surge in oil prices suggests that recent Iranian nuclear talks may not be an imminent downside factor for oil markets. US oil reserves falling to their lowest level since 1985. WTI and Brent futures rose more than 3% to US$93.69 and US$100.22 a barrel.

Comex gold futures rose 0.7% to $1,760 an ounce. Silver futures rose 0.7% to US$19.08 an ounce.

US and European bond yields were little changed while Australian and New Zealand bond yields were higher

The yield on the 10-year US Treasury rose to 3.05% and the yield on the 2-year note to 3.30%.

The yield on UK 10-year gilts rose to 2.57% and the yield on German 10-year bunds to 1.31%,

The Australian 10-year government bond yield rose to 3.63% and the New Zealand 10-year bond yield jumped to 3.84%.

Cryptocurrencies rebound as risk on returns

Both Bitcoin and Ethereum rebounded from the recent selloffs. Bitcoin was up 1.39%, to 21,485 and Ethereum was up 4.16%, to 1,653 in the past 24 hours.

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