2022/05/10 (043) Column

No Reason To Buy US Stocks On Tuesday!
May Be Tomorrow Because Of New Inflation Data?
How Ever, Japan’s Nikkei Ends At Near 2-Month Low Today,
While Gold Falls Further On Stronger USD Index & Lower Oil Price


Even after a very weak start to the week, there was only enough time for a recovery on the US stock market on Tuesday. The leading index Dow Jones Industrial went into trading with a plus of 1.6 percent, only an hour later it turned red again and fell to another low since March last year. Rising interest rates and the risk of economic contraction are weighing too heavily on investor sentiment. At the end of trading, the Dow lost 0.26 percent to 32,160.74 points.
The US Federal Reserve made the largest interest rate hike since 2000 with a 0.5 percent interest rate hike last week and prepared the markets for further comparable steps, wrote the strategists at asset manager Blackrock. “As a result, long-term yields skyrocketed and stocks tumbled,” it said. Data due later this week should show rising core inflation in the US.
The market-wide S&P 500 closed 0.25 percent higher at 4001.05 points. The Nasdaq 100 recovered a little more, up 1.30 percent to 12,345.86 points. However, the tech-heavy index had gone under the wheels the previous day and fell to its lowest level since the end of 2020.
Japan’s Nikkei Ends At Near 2-Month Low
The Nikkei 225 Index fell 0.58% to close at a near 2-month low of 26,167 on Tuesday, while the broader Topix Index lost 0.85% to 1,862, tracking a sharp selloff on Wall Street as worries about higher interest rates and their impact on economic growth dented risk appetite. Rising interest rates have particularly pressured technology names, with sharp losses from SoftBank Group (-1.8%), Lasertec (-2.1%), Tokyo Electron (-1.4%), Recruit Holdings (-2.3%) and NTT Data Corp (-7.2%). Resource-related stocks declined as well as commodity prices tumbled overnight, including Inpex Corp (-8%), Sumitomo Metal (-5%) and Nippon Steel (-1.6%). Other index heavyweights also dropped, including Nippon Yusen (-4.6%), Sony Group (-3.1%) and Toyota Motor (-3%). Meanwhile, Japanese stocks trimmed losses from earlier in the day amid news that Japan will retain its shares in two Russian oil and liquefied natural gas projects while phasing out Russian oil imports.
Gold Falls Further On Stronger Dollar
Gold declined to below $1,840 an ounce extending a 3-week decline and remaining under pressure from a strong dollar. The dollar index remained near the 104 mark, the strongest in 22 years, as expectations of further Federal Reserve monetary tightening to combat inflation and fears of slowing global economic growth drove investors into the safety assets. Last week, the Federal Reserve raised its benchmark overnight interestrate by 50 basis points, the most in 22 years, while Chair Jerome Powell added the bank was not considering a 75 basis-point move in the future. However, he assured Americans that the central bank will do what it takes to curb surging inflation, while acknowledging that this could risk economic pain. Investors are now awaiting the US inflation report for May for further clues on the central bank’s rate-hike path.
Brent Crude Extends Losses
Brent crude futures tumbled over 3% to around $102-per-barrel, a level not seen in two weeks, dragged down by a stronger dollar and lingering concerns about weakening global demand, particularly from top consumer China due to tightening lockdowns. The latest customs data showed that crude imports by the world’s second-largest economy fell 4.8% in the first four months of 2022 compared with last year. Pressuring prices further were growing worries that Europe would face a recession, exacerbating concerns about slowing global demand. Meanwhile, European Union countries struggle to agree on a ban on Russian oil. Some countries, such as Hungary and Slovakia, are concerned about the repercussions of such a move on their economies.
European Stocks Recoup Losses
European stock markets bounced back on Tuesday, attempting to recover from a big slump the day before, with the domestic DAX up more than 1% and the regional Stoxx 600 rising 0.9%, underpinned by gains in most sectors. Still, the session reflects mostly dip-buying trends, as stagflation risks, the war in Ukraine, worries over a slowdown in China, and a faster Fed tightening persist. In the earnings season, Bayer beat forecasts with a first-quarter adjusted earnings of €5.25 billion, mainly boosted by its farming business. On the data front, Germany’s May ZEW economic sentiment unexpectedly rose to -34.3 from a 2-year low of -41 in the prior month.Bitcoin Bounces Off Multi-Month Lows
Bitcoin rebounded from its lowest level in almost ten months to above $31,500 as dip buyers emerged to blunt a five-day sell-off. Bitcoin is now off more than 50% from its record high of around $69,000 touched last November, tracking a tech rout seen in the previous few months. Investors have grown worried over the implications of tighter global monetary policy on a backdrop of high inflation and a challenging growth outlook.
China Stocks Rise As PBOC Vows Support
The Shanghai Composite rose 1.06% to 3,036 while the Shenzhen Component gained 1.37% to 10,913 on Tuesday, resisting a wider regional selloff, as China’s central bank vowed to make full use of its monetary policy tools to support the economy amid a Covid-induced slowdown. There were also signs of bargain hunting in growth-oriented sectors of the market, with analysts suggesting that China’s bear market has entered its final stage as sellers dwindle. Gains in the new energy sector were led by Contemporary Amper (2.9%), Tianqi Lithium (2.7%), Sungrow Power (5.6%) and Eve Energy (9.8%). High-growth technology and healthcare names also staged a rebound, with strong gains from East Money (2.1%), Naura Technology (8.8%), Goertek (2%), China Meheco (2.7%) and Nantong Jinghua (10%). Meanwhile, energy stocks slumped on weaker oil prices, led by state-owned CNOOC’s 6.5% decline.