Wall Street extended losses as bond yields spiked further following Fitch’s US credit downgrade, and BOJ’s policy tweak added to the upside pressure of the yields from last week, despite an intervention to reduce the impact of a significant surge in the Japanese government bond yields. The US 10-year Treasury yield soared 11 basis points to 4.18%, the highest since November 2022. The US stock markets may be entering a correction phase after a multi-month rally, and the upcoming US non-farm payroll data can be another price mover providing clues to the labour market and the Fed’s policy path.
In the extended trading hours, Amazon’s shares jumped 10% amid strong earnings results, while Apple’s shares fell 3% as its overall revenue declined for the third straight quarter due to light iPhone sales. The mixed results did not offer much relief to US stocks, with equity futures all finishing lower in after-hours trading.
The US dollar paused its upside movement, weakening against the Japanese Yen, while little changed against other major currencies after a volatile session. Gold stabilized on a flat dollar, while crude oil prices regained momentum following OPEC +’s announcement to cut output further.
Asian markets are set to open mixed. The Hang Seng Index futures were up 1.33% as the PBOC’s pledge for more financial support to its private firms. However, Nikkei 225 futures fell 0.87%, and the ASX 200 was down 0.10% following Wall Street’s pullback.
Price movers:
8 out of 11 sectors finished lower in the S&P 500, with Utilities and Real Estate, leading losses, down 2.29% and 1.35%, respectively. Energy was the best performer, up 0.95% due to a jump in oil prices. Consumer Discretionary and Financials also ended in the green.
Apple’s share fell 3% in after-hours trading following weak earnings results, despite a beat on expectations. The iPhone maker reported earnings per share as US$1.26, topping an estimated US$1.19. The revenue was US81.80, also beating the US$81.69 expected. However, its overall revenue fell 1%, extending the third straight quarter decline due to soft iPhone sales. At the same time, its service revenue sheds light on its software growth, reporting an 8% year-on-year increase.
Amazon’s share jumped 10% in after-hours trading on strong second-quarter earnings and positive guidance. The company’s earnings per share came to US$0.65, topping an estimated US$0.35. Its revenue was US$134.4 billion vs. the $131.5 billion expected. Its AWS revenue was US$22.1 billion, also topping expectations of US$21.8.
WTI futures jumped 2.8% amid OPEC+’s decision to cut production further. The leader of the organization, Saudi Arabia, will continue to reduce output by 1 million barrels per day, signalled to cut more to stabilize oil prices. Russia also said it would curb its export to 300,000 barrels a day.
USD/JPY fell despite an intervention by the BOJ to purchase more government bonds. The Japanese 10-year government bond yield surged to 0.65% from 0.49% after the bank signalled to make it more flexible for the yield cap. The BOJ may not be able to avoid shaking the global bond markets as it takes steps to normalize its monetary policy.
The BOE raised the interest rate by 25 basis points to 5.25%, booking its 14th consecutive increase. The bank remained cautious towards the country ‘s sticky inflation and said no intention to pause hiking rates. The British bond bounced a session low against the USD following the decision.
ASX and NZX announcements/news:
Fonterra Co-operative Group Ltd. (ASX/NZX: FSF) reduced its 2023/24 season forecast Farmgate Mike Price range from N$7.25 to N$8.75 to N$6.25 to N$7.75, with a midpoint down N$1 to N$7. CEO Miles Hurrell says the revised forecast Farmgate Mike Price rage reflects ongoing reduced import demand for whole mike powder from Greater China.
Today’s agenda:
RBA Monetary Policy Statement
Canada Employment Change
US Non-farm Payroll
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