Oall Street pared early gains and finished lower for the second straight trading day as risk sentiment prevails ahead of key US CPI data and major company earnings reports. According to Factset, S&P 500 earnings growth is projected at 4.3% in the second quarter, the slowest since April 2020. US CPI data for June is expected to top the previous figure at 8.7% year on year , pointing to persistent inflation despite aggressive rate hikes by the Fed. Delta Airlines, JP Morgan Chase and Morgan Stanley are due to report earnings before US markets open tonight.
Crude oil prices fell more than 8% as commodity futures continued to set in a predictable economic downturn, while 10-year and 2-year Treasury yields remained inverted. The USD, Japanese Yen and bonds continued to rise on growing demands for safe havens, with EUR/USD briefly hitting parity.
Most Asian stock markets are set to open higher, as indicated in futures prices, despite losses in the overnight US session. However, the new Covid outbreak in China and upcoming US data could continue to pressure sentiment.
AU and NZ day ahead
The RBNZ rate decision will be in focus today, with strong expectations that the bank will maintain the pace of a 50 basis point rate hike to contain inflation, which has been running at 6.9% in the first quarter. The Australian and New Zealand dollars were slightly higher against the USD during the overnight session as the deteriorating US economic outlook limited dollar strength. AUD/USD and NZD/USD were at 0.6757 and 0.6133 at 07:20 EAST this morning.
The ASX 200 is expected to open flat as SPI futures are little changed. Local stock markets are expected to come under pressure as energy stocks fell in the US session due to falling oil prices. But the recent outperformance of defensive sectors, including utilities, consumer staples and healthcare, could offset some losses.
The S&P/NZX 50 rose 0.7% in the first half hour of trading, with Air NZ leading the gains, up 2.4%, to NZ$0.63, suggesting that airline stocks could continue to benefit from falling fuel prices and a positive outlook for travel demand.
The Dow Jones Industrial Average was down 0.62%, the S&P 500 was down 0.92% and the Nasdaq was down 0.95%.
All 11 sectors of the S&P 500 closed lower, with energy stocks leading losses, down 2% as crude oil fell below $100 a barrel. Big tech stocks were mixed. Apple and Meta Platforms were up, while the rest of the mega-caps including Alphabet, Amazon, Microsoft and Tesla Motors were down.
Airline stocks jumped on positive earnings expectations, as well as a drop in oil prices. Delta Airlines, United Airlines and American Airlines were all up 6-10%.
The performance of large companies overnight (July 13, 2022)Source: CMC Markets NG
Further dramas emerged between Tesla CEO Elon Musk and Twitter over the stalled acquisition deal. The social media giant is suing Elon Musk for failing to complete the merger. Shares of Twitter rose 4.3% overnight and 1% in after-hours trading.
Major European indices were mostly higher as regional stocks tried to rebound from lows. The Stoxx 50 (+0.44%), the FTSE 100 (+0.18%), the DAX (+0.57%), the CAC 40 (+0.80%). Read more
The outlook for weaker demand linked to recession fears continued to weigh on commodity markets, with oil prices plunging 8% and copper 4%. API data shows U.S. crude inventories jumped 4.8 million for the week ended July 1, more than expected from a drawdown of 1.9 million. Precious metals also fell further due to a strong dollar, while agricultural commodities fell on demand concerns.
WTI: $95.84 per barrel (-7.93%), Brent: $99.24 per barrel (-7.34%), Natural Gas per MMBtu: $6.16 (-4.09%)
COMEX Gold Futures: $1,724.80 per ounce (-0.40%), COMEX Silver Futures: $18.96 per ounce (-0.88%), contracts copper futures: $328.80 per pound. (-4.15%)
Wheat: $814.25 per bushel (-4.93%), Soybeans: $1,343.00 per bushel (-4.41%), Corn: $586.50 per bushel (-6.76%).
The US dollar index fell slightly to 107.98. EUR/USD briefly fell to a parity level before rebounding to 1.0036, while USD/JPY fell 0.4% to 136.86 at 8:00 AEST. All other major currencies except the Canadian dollar rose slightly against the greenback. However, falling US bond yields and rising EUR/USD may suggest that dollar strength may begin to fade due to the growing “Fed pause” after July.
Global bond yields continued to fall on risk aversion sentiment.
10-year US: 2.98%, 2-year US: 3.05%.
10-year German Bund: 1.13%, 10-year British Gilt: 2.07%.
Australia 10 years: 3.41%, New Zealand 10 years: 3.67%.
Cryptocurrencies fell further due to weak sentiment and bad news. A large number of major crypto brokers, including FTX, 3AC, and Voyager Digital, are suffering losses and bankruptcy due to the stablecoin crash and the fall of major digital coins. The global crypto market cap fell 4.29% to US$871.44 billion in the past 24 hours according to Coinmarketcap.com.
(See prices at 8:19 AEST below)
Bitcoin: $19,439 (-4.74%)
Ethereum: $1,045 (-8.09%)
Gimbal: $0.4289 (-3.85%)
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