US stocks halt rally on weak economic data, Asian markets set to open lower
OThe All Street rally came to a halt on the first trading day of August as a drop in global manufacturing PMI data weighed on sentiment. Weak economic data raised concerns about demand in commodity markets, with oil prices plunging 5% and copper 1.23%. Rising odds of a Fed pivot pushed bond yields further and pushed the USD lower, while the Japanese yen strengthened to hit a June 17 high.
Manufacturing PMI data across the globe weakened further. Data from all major EU economies contracted in July due to the ongoing energy crisis, with the region struggling to cope with a cold winter when gas supplies cut off at the end of the year. China, Japan and the United States also released pessimistic figures. However, with weakening economic activity in sight, equity markets are on track to ride high in a “Fed pause” scenario towards the end of the year, indicated by futures markets. .
AU and NZ day ahead
Australian and New Zealand stocks ended strong on Monday as Asian markets followed gains in US equities last Friday. In addition, the Aussie and Kiwi Dollars strengthened against the US Dollar overnight amid a weakened outlook for the US Fed to maintain its pace of rate hikes. The New Zealand dollar strengthened against its counterpart, with the local exchange rate still leading the major central banks.
The S&P/ASX 200 is expected to open lower as futures are down 0.3%. The RBA’s rate decision is in focus today as the Reserve Bank is expected to raise the official exchange rate by another 50 basis points to contain inflation, which hit 6.1% in the second quarter . Australian government yields fell sharply ahead of the rate decision, with 10-year bond yields slipping to the lowest since late April.
The S&P/NZX 50 opened on a back foot, down 0.41%.
The Dow Jones Industrial Average fell 0.17%, the S&P 500 fell 0.35% and the Nasdaq fell 0.25%.
The energy sector led to large losses due to a sharp decline in oil prices, down 2%. Consumer stocks outperformed as strong Amazon earnings supported sector optimism, with consumer discretionary up 0.21% and consumer staples up 1.2%.
Boeing shares jumped 6% after the Federal Aviation Administration approved to resume deliveries of its 787 Dreamliner.
On the earnings front, Pinterest shares soared 22% in after-hours trading despite a loss in profit and revenue, with Elliott Management confirming it was the company’s largest investor.
The performance of large companies overnight (August 02, 2022)
Source: CMC Markets NG
Major European indices were down slightly on weak manufacturing PMIs, but HSBC shares jumped on a positive outlook. The Stoxx 50 (-0.04%), the FTSE 100 (-0.13%), the DAX (-0.03%), the CAC 40 (-0.18%). Read more
Crude oil prices fell sharply on weakening economic data from China. The growing likelihood of OPEC+ further increasing production volume has also put pressure on the oil market. Copper fell amid China’s growth concerns, while precious metals, such as gold and silver, rose on lower bond yields. However, the price of natural gas remained high due to persistent supply problems.
WTI: US$93.89 per barrel (-4.80%), Brent: US$100.10 per barrel (-3.72%), Natural Gas: US$8.28 per MMBtu (+0.66% )
COMEX Gold Futures: US$1,789.3 per ounce (+0.42%), COMEX Silver Futures: US$20.34 per ounce (+0.68%), Copper Futures: US$3.53 l ounce (-1.2%)
Wheat: $800.25 per bushel (-0.93%), soybeans: $1,406. 50 per bushel (-4.26%), Corn: US$609.75 per bushel (-1.65%).
The US dollar index fell for the fourth trading day, sending all other major currencies up except the Canadian dollar. The CAD was under pressure due to a sharp decline in oil prices. USD/JPY fell 1.2% to 131.66, the lowest since June 17. The pair is down 6% from its peak above 139 in mid-July. EUR/USD consolidated above the 20-day moving average for the third trading day, which is short-term technical support at 1.0155.
Global bond yields continued to fall on fears of an economic slowdown. US 10- and 2-year bond yields remained converted.
10-year US: 2.59% 2-year US: 2.89%.
10-year German Bund: 0.77%, 10-year British Gilt: 1.80%.
Australia 10 years: 3.05%, New Zealand 10 years: 3.39%.
Crypto markets also lost bullish momentum on Monday amid uncertainty.
(See below prices at 8:03 AEST according to Coinmarketcap.com)
Bitcoin: $23,027 (-2.31%)
Ethereum: $1,625 (-4.56%)
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