US stocks off session highs as bond yields climb, Asian markets cheer for China’s reopening

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Asian markets are expected to open slightly lower as US stocks finished off session highs on a jump in bond yields, despite a positive close in the overnight session. The US 10-year bond yield rose to above 3%, the highest in one month as traders strengthened expectations for further rate hikes ahead of the US CPI data later this week. Notably, the tech-heavy index, Nasdaq, has outperformed, suggesting investors looked beyond slowing economic growth and rising rates and continued dip-buys in the growth stocks.

Broad Asian equity markets were strong amid China’s reopening, typically in the Chinese EV stocks, with Xpeng, NIO, and BYD, all up between 5% and 8%. The recent rebounding in Chinese stocks indicates investment funds are rotating to more policy-pro markets to seek gains.

AU and NZ day ahead

The S&P/ASX 200 futures were down 0.03%, pointing to a slightly lower open in ASX. The local benchmark index fell on Monday despite a broad-based rally in global markets ahead of the RBA rate decision today, while the Australian short-dated bond yields climbed. It is expected a rate hike of between 25 to 50 basis points by the RBA today. We expect further strengthening in the Aussie dollar, which just finished under 72 cents against the USD.

The S&P/NZX 50 fell 0.47% in the first half-hour of trading. The index has bottomed up since late May, along with the global equity markets. The recent surge in dairy stocks also helped the gains. However, the Kiwi dollar is losing steam to its peers amid the recent falling dairy prices and dampening economic outlooks on RBNZ’s rapid rate hikes.

US

The Dow Jones Industrial Average rose 0.07%, the S&P 500 was up 0.4%, and Nasdaq advanced 0.31%.

8 out of 11 sectors in the S&P 500 finished higher. The growth sectors, including consumer discretionary, technology, and communication service, outperformed as big techs mostly finished higher on dip-buys. Amazon shares rose 2% on 1-for 20 stock splits, with the adjusted shares price at US$124.89. Apple was up 0.51% but fell off the session high after the WWDC event. The tech giant announced MacBook Air with the new M2 chip, the iOS 16 software, and the New Apple Watch software.

Energy stocks, however, were lower on falling oil prices. Occidental, Exxon Mobil, and Chevron, all slid less than 1%.

Europe

European stock markets also finished higher amid China’s reopening optimism, supported by energy stocks. The Stoxx 50 (+1.45%), FTSE 100 (+1.00%), DAX (+1.34%), CAC 40 (+0.98%). Read more

Commodities

Crude oil prices slipped as the OPEC+’s plan for an output increase weighed. A strong US dollar also pressed on the oil markets. In addition. the recent rebounding in EV stocks may pressure fossil fuel prices too.

WTI: US$118.50 (-0.31%), Brent: US$119.96 (+0.20%), Natural Gas: US$9.32(+9.37%)

Precious metals fell amid a jump in the US bond yields, together with a strengthened USD.

COMEX Gold futures: US$1, 844 (-0.31%), COMEX Silver futures: US$22.09 (-0.01%)

Agricultural products were all up.

Wheat: US$1,093.00 (+5.10%), Soybean: US$1,533.50 (+0.43%), Corn: US$742.50 (+2.13%).

Currencies

The Japanese Yen tumbled further against the USD to a fresh 20-year low as the US bond yields jumped. Eurodollar and Aussie dollar will be under close watch today ahead of both the central banks’ meetings. The EUR/USD fell off the 1.07-mark again amid a strong US dollar.

(See the below FX rates at EAST 8:20 am, Bloomberg)

US dollar index: 102.41 (+0.24%)

EUR/USD: 1.0691

GBP/USD: 1.2528

USD/JPY: 131.96

USD/CHF: 0.9708

USD/CAD: 1.2579

AUD/USD: 0.7194

NZD/USD: 0.6491

Treasuries

US bond yields surge ahead of the US CPI data, and German bond yields gain on expectations of the ECB’s rate hike.

US 10-year: 3.04%, US 2-year: 2.73%.

Germany bund 10-year: 1.316%, UK gilt 10-year: 2.245%.

Australia 10-year: 3.477%, NZ 10-year: 3.675%.

Cryptocurrencies

Cryptocurrencies strongly rebounded as investors buy from the recent dips. The whole market cap rose 3.22%, to US$1.28 trillion in the last 24 hours.

(See below prices at AEST 8:24 am according to Coinmarketcap.com)

Bitcoin: US$31,471 (+4.68%)

Ethereum: US$1,862.13 (+2.46%)

Cardano: US$0.61 (+6.28%)