Asian equity markets are set to open lower despite a positive close in US stocks overnight. Wall Street swung off session lows and finished higher as tech shares rebounded despite further spikes in US bond yields. The 10-year US treasury yield briefly topped 3%, the highest since 2018. The rebound was fuelled by merging dip-buys as broader markets reached fresh year lows ahead of the FOMC meeting later this week when the Fed is expected to raise the interest rate by 50-basis points and commence its balance sheet unwinding. Investors may also seek high-quality growth assets to offset 40-year high inflation.
Australia and New Zealand day ahead
SPI futures fell 0.34%, pointing to a lower open on the ASX. On Monday, the ASX 200 fell as mining and energy companies sank ahead of the RBA meeting today. The Reserve Bank is expected to raise the interest rate for the first time in 12 years, while bank stocks rose as the local bond markets sold off amid fears of rising rates. The major banks, including NAB, ANZ, Macquarie Group, and Westpac are to report the half-year results this week and next week.
The NZX 50 rose 0.37% at the open. Local markets may take a ride on the US markets’ rebounding overnight. However, surging bond yields in both Australia and New Zealand could continue to apply pressure on local property stocks, with the Kiwi Property Group Ltd down 13%, Fletcher building falling 20%, and Goodman Property Trust sliding 22% from their January highs respectively.
US and EU stocks
The Dow Jones Industrial Average was up 0.26%, the S&P 500 climbed 0.57%, and the Nasdaq advanced 1.63%.
Growth sectors led broader markets gains, with Meta Platform up 5.3%, Microsoft rising 2.46%, and Alphabet climbing 2.11%. The chipmakers’ shares jumped ahead of the earnings reports, both Nvidia and Advanced Micro Devices up more than 5%.
Energy stocks also outperformed as oil prices rose amid supply concerns. Occidental jumped near 6%, Chevron was up 2% and Exon Mobil advanced 1.5%.
All major banks’ shares also finished higher. Most of the other sectors, however, closed lower amid global economic headwinds.
European major indices finished lower on thin liquidity due to a public holiday. The selloff was triggered by a single trade of Citigroup targeting the Nordic markets, according to CNBC. The Stoxx 50 was down 1.85%, CAC 40 slid 1.66%, DAX fell 1.13% and the FTSE 100 was closed.
Crude oil prices gained on ongoing supply concerns as EU is close to reaching an agreement to ban Russia’s oil. Traders are also keeping one eye on the upcoming OPEC meeting on Thursday. WTI crude futures were up 0.43%, to US$105.12 per barrel, and Brent futures were up 0.44%, to US$107.50 per barrel.
The natural gas price jumped 4.18%, to US$7.48 per MMBtu on accelerating geopolitical tensions as Russia halts supply to Poland, while EU members refused to make payment in Rouble.
Precious metals tumbled on spiking bond yields which further strengthened the USD. NYMEX gold futures plunged $48.60, to US$1,863.10 per ounce, approaching the next support level at $1,840. Silver was down 1.74% to US$22.68 per ounce but bounced off the day-low at $22. 11.
The USD index hovered around a two-year high above 103, while all other major currencies weakened against the greenback. USD/JPY consolidated above the 130-mark, a 20-year high. EUR/USD moved into a very tight range between 1.0504 and 1.0562 in the last three trading days. USD/CHF spiked to a fresh high two-year high at 0.9786.
All commodity currencies were also lower against the US dollar. AUD/USD fell slightly to 0.7055. It is widely anticipated that the RBA will raise the cash rate by 15 basis points later today, which could reverse the course of an oversold Australian dollar.
The broader bond markets sold off sharply ahead of the FOMC meeting as it is almost certain that the Fed will raise the Fed funds rate by 50-basis points and let its securities to run off. Inversely with the price, US bond yields spiked. The 10-year US Treasury yield rose to 2.99% after briefly topping 3%, the highest since December 2018. The 2-year Treasury yield surged to 2.73%. Both US 5-year and 30-year bond yields topped 3%, traded at 3.03% and 3.00% respectively.
The Australia 10-year bond yield rose to 3.30%, the highest since November 2014, as the local bond markets were hit by a highly expected hawkish move by the RBA later today. The New Zealand 10-year bond yield spiked to 3.76%, the highest since June 2015.
Leading cryptocurrencies were slightly up in the last 24 hours. Bitcoin rose 0.99% to $US38,676 and Ethereum was up 2.21%, to US$2,860. Both Bitcoin and Ethereum fell more than 20% from their year highs at the start of April. The whole markets cap for Cryptocurrencies slid to US$1.73 trillion from above $1.8 trillion last week.
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