Asian markets brace for mixed open despite positive second day on Wall Street
Oall Street rose for the second straight trading day as investors digested central banks’ hawkish stance on monetary policy. Fed Chairman Jerome Powell reiterated his determination to fight inflation, which was the last appearance before the Fed’s rate decision on September 21, making another rate hike of 75 basis points base in September almost a “concluded fact”. The European Central Bank raised the interest rate by 75 basis points to control inflation, the biggest increase ever. With rising inflation and slowing growth, fund flows could begin to enter the “stagflation” cycle for defensive assets.
- The Dow rose 0.6%, the S&P 500 rose 0.66% and the Nasdaq climbed 0.6%. 8 of 11 S&P 500 sectors ended higher, with financials and healthcare sectors leading the gains as investors were looking for defensive stocks. All major banks, including JPMorgan Chase, Citigroup Inc. and Wells Fargo rose 2-3%, while mega-cap tech companies were mixed. Apple fell 0.95% a day after the release of the new iPhone 14 series product.
- DocuSign (NASDAQ: DOCU) shares soared 18% after hours on a beat of earnings expectations. The company’s EPS was reported at $0.44 versus $0.42 estimated. Revenue increased 22% annually to $622.2 million.
- The ECB hiked the interest rate by 75 basis points to 0.75% to combat soaring inflation, which was highly anticipated. The central bank raised its inflation expectation to 8.1% for 2022, indicating more rate hikes to come, but the data depends on whether the euro zone faces server challenges for a possible economic recession due to the energy crisis and soaring food prices.
- Asian futures markets are mixed, indicating a mixed open. ASX futures rose 0.04%. Nikkei225 futures were down 0.53% and the HSI edged down 0.02%. While Australian and New Zealand stock markets were supported by the rebound in Wall Street optimism, Chinese stocks continued to suffer from the country’s new Covid shutdowns, with the Chinese yuan under pressure from a new devaluation to a key psychological level of 7.
- FX markets flipped in directions as the USD subsided. EUR/USD remained at parity after rebounding from a daily low of 0.9925. USD/JPY rose slightly to just under 144 after hitting a daily high of 144.56. Commodity currencies such as AUD and NZD also hit session lows. The Canadian dollar, however, rebounded with the rise in the price of oil, a day after the BOC raised rates by 75 basis points.
- Crude oil edged higher after the one-day strong selloff despite the biggest build in inventories in five months. U.S. crude oil inventories rose 8.8 million barrels for the week ending Sept. 2, well above the estimate for a drawdown of 2.0 million. We could see the massive sell-off in the oil markets come to a halt as the supply issue remains problematic. WTI futures rose 1% to $82.81 a barrel, and Brent futures rose 0.5% to $88.43 a barrel.
- The price of gold continued to be under pressure on a strong US dollar, while copper rebounded on a recovery in risk sentiment. Comex Gold futures fell 0.54% to $1,718.6 an ounce. And Comex Copper futures rose 2.81% to $3.53 an ounce.
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