Further rise in bond yields drags Wall Street down, Asian markets set to fall
Oall Street finished at the session’s low as bond yields rose further amid strong economic data. U.S. retail sales unexpectedly rose 0.3% in August, well above an estimated 0.1% decline, while jobless claims fell to 213,000 for the week last, the lowest in a month. The data reinforced bets that the Fed will remain hawkish on rate hikes next week. The yield on US 2-year bonds hit 3.86%, a new 15-year high, while the US dollar strengthened, sending major currencies in Asia-Pacific crashing, with the yuan falling to the above 7, a key psychological level. Oil and gold prices fell due to a strong dollar.
- The Dow Jones fell 0.54%, the S&P 500 fell 1.13% and the Nasdaq fell 1.43%. 9 of the 11 S&P 500 sectors ended lower on a sell-off. Energy stocks fell on falling oil prices, while financials and healthcare stocks closed higher. Shares of most mega-cap companies ended lower, but Netflix jumped for the second dayup 5%, driven by the positive outlook for its new ad-supported program. Adobe shares plunged 17% on a deal to acquire Figma, a design software company, on a $20 billion bid, which will be the biggest takeover for Adobe.
- The yuan fell against the US dollar, rising above 7, for the first time since July 2020. USD/CNH hit a high above 7.19 in August 2019 and July 2020. The pair rose to 7.013 this morning after major mainland banks cut deposit rates to stimulate loan applications. A host of influential economic data on China, including retail sales, industrial production and the unemployment rate, will be watched in today’s session.
- Asian markets are expected to open lower as yields on broader government bonds have risen, weighing on risky assets. ASX futures slipped 0.73%. Nikkei225 futures were down 0.83% and Hang Seng index futures were down 0.23%.
- Air New Zealand is said to be in talks for a merger with Virgin Australia. The New Zealand airline confirms that “it has not been approached and is not in discussions with any party regarding the potential merger transaction”, according to NZX.
- Crude oil and gold prices fell amid a strong US dollar and soaring bond yields. In fact, the broad commodity markets have been hurt by risk aversion sentiment sparked by impending fears of a recession. A deep reversal in US bond yields warns of an inevitable economic recession sooner or later, a financial crisis like the crash of the 1970s.
- Ethereum has completed a major blockchain merger that is expected to reduce electricity consumption by 99%. The progress of the so-called “proof-of-stake” change took a few months, aiming to reduce costs for users and potentially generate around 5.2% return. The Ether token, however, has fallen 6.9% in the past 24 hours due to a slump in risky assets.
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