Asian markets are set to jump as Wall Street rallies amid earnings optimism

US stocks jumped amid optimism about the second quarter companies’ earnings, with all the three benchmark indices rising above the 50-day moving average for the first time since late April. Netflix has set a positive tone for the big techs’ performances. The live streamer’s share price rose 5%  and added 7% in the after-hours trading on Tuesday. The next eye-catching earnings report will be Tesla, which will be released on Wednesday after the US closing bell.

The news has also supported the broad optimism that the Nord Stream 1 pipeline will recover operation as scheduled, bringing a relief rally to the EU markets.

The bond yields moved higher as the European Central bank may outsize its rate hike by 50 basis points this week, which caused a drop in the US dollar against the other major currencies. This also stabilizes the commodity markets this week after a weeks-long decline.

The broad rally is primarily boosted by “Fed pause” bets and hopes for a rosy earnings season. Investors tend to buy dips into growth stocks to seek a market bottom. However, cautions may start rising in the wake of bond yields reversing downtrends while remaining inverted.   

AU and NZ day ahead

The commodity currencies strengthened against the US dollar, with both AUD and NZD jumping more than 1% to the highest levels in 3 weeks. The comeback of the broad commodity prices also supported the rebound in the regional currencies.

The S&P/ASX 200 is set for a strong open as the futures were up 1.21%. Energy stocks are in a strong rebounding trend, with Woodside Energy and Whitehaven Coal both jumping more than 2% on Wednesday. Today’s spotlight will be on RBA governor Phillip Lowe’s speech.

The S&P/NZX 50 was up 0.71% in the first hour of trading on a broad-based rally. Heartland Bank and Push Pay led gains, both up 2.4% and 2% respectively. However, the overnight Global Dairy Trade index fell for the third straight auction, to US$4,166 per MT. The whole milk powder price dropped 5.1%, to US$3,757, which pressed both Fonterra and A2 milk prices to slip.

US

The Dow Jones Industrial Average rose 2.42%, the S&P 500 was up 2.75%, and Nasdaq advanced 3.11%.

The broad-based rally was led by risk-on sentiment, typically in the growth stocks, with communication services rising 3.6%. Twitter’s shares jumped more than 2% after Delaware Court ruled out an expedited trial against Elon Musk that sets to commence in October.

Travel-related stocks were also outperformers. The major airlines, including Delta, American Airlines, and United Airlines were all up between 4-6%.

Both industrials and energy sectors jumped more than 3% as industrial materials and oil prices rebounded amid a weakened US dollar this week. 

The major companies’ performance overnight (20 July 2022)

Europe

The European markets extended gains on broad optimism that was boosted by the Nord Stream 1 pipeline operation recovery.

The Stoxx 50 (+2.15%), FTSE 100 (+1.01%), DAX (+2.69%), CAC 40 (+1.79%). 

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Commodities

Crude oil regained ground this week as supply concerns offset recession fears amid a broad rally in the risk assets. Biden’s trip to Saudi Arabia ended with no material impact on the oil supply as OPEC + showed no intention to pump up its output volume, while the US’s oil reserve is depleting. A weakened USD has also been a big contributor to the broad rebound in the commodity markets.

WTI: US$104.22 per barrel (+1.58%), Brent: US$1.08 per barrel (+1.02%), Natural Gas: US$7.30 per MMBtu (+0.44%)

COMEX Gold futures: US$1, 709.80 per ounce (-0.05%), COMEX Silver futures: US$18.70 per ounce (-0.07%), Copper futures: US$3.30 per ounce (+0.35%)

Wheat: US$812.25 per bushel (-0.06%), Soybean: US$1,358.25 per bushel (-1.59%), Corn: US$595.25 per bushel (-2.54%).

Currencies

The US dollar index fell 0.64%, to 106.54, while the Eurodollar continued to firm against the USD. EUR/USD jumped 1 cent to 1.0241 at EAST 8:56 am this morning. USD/JPY stayed flat at just above 138 after hitting the day low at 137. 38. The US dollar sees weakness against the other major currencies this week as the odds for a 100-basis points rate hike softened, while the ECB is expected to outsize a hike by 50 bps. The BOJ decision will also be in focus on Thursday about its YCC stance.

Treasuries

The US bond yields were higher on ECB’s rate hike bets.

US 10-year: 3.02%, US 2-year: 3.24%.

Germany bund 10-year: 1.27%, UK gilt 10-year: 2.17%.

Australia 10-year: 3.55%, NZ 10-year: 3.73%.

Cryptocurrencies

The cryptocurrencies jumped on broad optimism. Bitcoin topped US$23,000 for the first time since 13 June. And Ethereum rose above US$1,500, the highest seen on 10 June. Both leading coins had a major bullish breakout on the descending trendline and the 50-day moving average.  

(See below prices at AEST 9:08 am according to Coinmarketcap.com)

Bitcoin: US$23,527 (+7.62%)

Ethereum: US$1,568 (+2.99%)

Solana: US$45.34 (+10.27%)

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