DAILY MARKET ANALYSIS 29-06-2022

Stocks

US stock futures steadied in Asian trade on Wednesday after the major averages closed sharply lower overnight, as economic concerns continued to weigh on sentiment. Stocks rallied early in regular trading on Tuesday before giving up those gains following a disappointing consumer confidence index reading. The Dow fell 1.56%, the S&P 500 lost 2.01% and the Nasdaq Composite dropped 2.95%.

European stocks retreated on Wednesday as global sentiment remained volatile, with investors monitoring the economic outlook. The pan-European Stoxx 600 dropped 0.4% in early trade, with autos shedding 1.5% to lead losses as most sectors and major bourses slid into the red. Oil and gas stocks bucked the downward trend to add 0.6%.

Hong Kong and South Korea shares led losses in Asia on Wednesday after Wall Street’s negative lead. Hong Kong’s Hang Seng index declined 1.66% while the Hang Seng Tech index dropped 3.17%. The Nikkei 225 in Japan was down 1.17% while Australia’s S&P/ASX 200 was 0.8% lower.

Currencies

•  The dollar index firmed up around 104.6 on Wednesday after jumping half a percent in the previous session, underpinned by remarks from central bank officials who indicated support for continued aggressive monetary tightening ahead. Federal Reserve policymakers promised further rapid interest rate hikes to bring down high inflation on Tuesday but pushed back against growing fears among investors and economists that sharply higher borrowing costs will trigger a steep downturn.

• EUR/USD is trading close to 1.0500, undermined by the market anxiety ahead of the key data/events. ECB President Lagarde said the central bank intends to raise policy rates by 25bps on July 21st, the first hike in 11 years and that the normalization path will go as far as necessary to ensure that inflation stabilizes at the 2% target over the medium term.

• GBP/USD is trading just below 1.2200, paring back gains amid a renewed uptick in the US dollar across the board. Investors remain wary amid looming recession and Brexit worries. Powell and Bailey are due to speak at the Policy Panel at the ECB Forum on later today.

•  The Australian dollar traded around $0.69, holding close to its lowest levels in two years, dragged lower by softer commodity prices amid growing fears about a looming slowdown in the global economy. There are also hints that the Australian economy is cooling with house prices slipping and consumer sentiment in a deep hole.

•  The Japanese yen traded around 136 per dollar, remaining close to a 24-year low of 136.7 hit earlier in June, as the Bank of Japan adhered to its low-yield, stimulative policy at a time other major central banks are racing ahead with interest rate hikes. The central bank also resisted market pressure on the yen and government bonds amid earlier speculations mainly among foreign investors that the bank may tweak its current yield control policy.

Bonds

Treasury 10-year yields slid more than 1 basis point during the Asian session, trading to around 3.17% as Asian equities followed Wall Street lower. The yield on the German 10-year Bund and United Kingdom 10Y Bond Yield were little changed and were last seen at 1.65% and 2.46% respectively.

Commodities

Gold prices treaded water on Wednesday, with lower U.S. Treasury yields lending support, as bullion’s struggle to break out of its range-bound trade continued. The yellow metal is caught between pressure from prospects of higher interest rates and support from recession risks. XAU was last seen traded around $1.820 per ounce.

Oil prices fell on Wednesday after rising in the previous three sessions, but losses were limited on the view that global supply tightness will continue as there is limited room for major producers such as Saudi Arabia to boost production. U.S. West Texas Intermediate (WTI) crude slid 44 cents to $111.32 a barrel while Brent crude dropped 61 cents to $117.37.

Up Ahead –Thursday 30-06-2022

•   ALL OPEC Meetings

•   CAD GDP m/m

•   USD Core PCE Price Index m/m

•   USD Unemployment Claims

*The information presented above is intended for informative and educational purposes, should not be considered as investment advice, or an offer or solicitation for a transaction in any financial instrument and thus should not be treated as such. Past performance is not a reliable indicator of future results.