US stocks fall on Powell’s promise to control inflation, bond yields jump, oil recovers $110, gold higher

AAsian stock market futures are mostly in the green despite a four-day winning streak in US stocks after Fed Chairman Jerome Powell hinted that a one-year rate hike half-percentage could be considered to curb inflation. Oil prices have resumed gains amid the ongoing war between Ukraine and Russia, which is also straining the rebound in stock markets.

SPI futures are up 1.1%, indicating a big jump at the open of trade for the S&P/ASX 200 in Australia. Australia’s 10-year bond yield gained 13 basis points to 2.7% on Tuesday morning, its highest level since 2018 amid a global bond sell-off. The NZX 50 is down 15 points in the first hour.

US and European stocks

The Dow Jones Industrial Average fell 0.61%, the S&P 500 fell 0.04% and the Nasdaq fell 0.4%.

Growth stocks were hit by soaring bond yields after hawkish comments from Powell, with the consumer discretionary and technology sectors falling more than 1%. Mega cap companies ended mixed. Meta platforms were down 2.3% and Microsoft down 0.42%. Apple and Tesla were higher. Apple’s main supplier, Foxconn, said the factory had resumed almost full operating capacity after being suspended last week due to the Covid-induced lockdown in Shenzhen, China.

Airlines also suffered losses during the session on rising oil prices. Major carriers, including Delta Airlines and United Airlines, fell 4.2% and 3.5%, respectively. Boeing shares fell more than 3% after its China Eastern Airlines Boeing 737 jetliner crashed in western China.

Energy stocks soared as oil prices resumed their gains. Occidental jumped more than 8%, Devon Energy 5.3% and Exxon Mobil 4.7%.

European equities mostly ended lower, with the Euro Stoxx 50 down 0.53%, the DAX down 0.60% and the CAC 40 down 0.57%. The FTSE 100 climbed 0.51%.

treasures

The Fed Chairman’s comments pushed US bond yields to new highs in nearly 3 years. The 10-year US Treasury yield jumped to 2.30%. The 2-year Treasury yield jumped to 2.12%, which is the first time that the short-term bond yield has crossed the 2% mark since May 2019. Spreads between 10-year bond yields and The 2-year term, which is the key indicator for assessing the economic outlook, has tightened further, reaching a possible level of recession.

Germany’s 10-year bond yield rose to 0.46% and France’s 10-year bond yield to 0.92%. The yield on the UK 10-year gilt fell to 1.64%.

Merchandise

Oil prices jumped for the third straight session after news that US allies in the EU were considering joining Russia’s oil export embargo. The ongoing war between Russia and Ukraine is also keeping the price of oil up.

WTI jumped 7.46% to US$112.50 a barrel, and Brent crude rose 8.09% to US$116.65 a barrel.

Gold futures also rose, buoyed by risk aversion sentiment, up US$6 to US$1,935.75 an ounce. Silver rose 1.21% to US$25.39 an ounce.

Currencies

Powell’s hawkish reiteration of monetary policy strengthened the US dollar. The USD rose against most major currencies, with the exception of the Canadian dollar, due to high oil prices. The USD/CAD pair plunged 22 points, down for the fourth consecutive trading day. EUR/USD fell 0.32%, testing the key support level at 1.10.

Cryptocurrencies

The global crypto market capitalization increased by 0.61%, to $1.87 trillion in the past 24 hours. Major cryptocurrencies were mixed, with Bitcoin down 0.26% to just over US$41,000 and Ethereum up 1.53% to over US$2,900, XRP up 4.4%, to US$0.8378.

Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not expressing opinions) is provided for informational purposes only and does not take into account your personal circumstances or objectives. Nothing in this document is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically restricted from processing prior to providing such material, we do not seek to take advantage of the material prior to its dissemination.