Moving markets today: Asian shares follow Wall Street’s slide, gold hits record, oil prices climb, Fed officials’ eyes three rate cuts, China’s services sector expands, All eyes on Fed’s Powell speech and US services PMI
US stocks dropped as investors worried the Federal Reserve might delay cutting interest rates. Tesla’s stock also fell after reporting fewer quarterly deliveries, the first decline in nearly four years. In Asia, South Korea saw market losses following the US trend. Gold prices continued to rise, hitting a record high for the third day in a row. US long-term Treasury yields rose to their highest levels in several months overnight before moderating some of the gains. Taiwan was hit by its strongest earthquake in almost 25 years, causing damage and disruptions. Investors are looking forward to speeches from Federal Reserve officials, especially US central bank governor Jerome Powell. No major economic reports are expected in the UK. Here are five key takeaways for your day.
Fed policymakers see three rate cuts this year as ‘reasonable’
Two Federal Reserve policymakers, often seen as having contrasting views on monetary policy, both suggested that cutting US interest rates three times this year would be a sensible move, despite recent signs of stronger economic performance causing uncertainty among investors. Daly, speaking at an event in Las Vegas, expressed that the economy and policy are currently in a favourable position, with inflation gradually decreasing, a robust labour market, and steady growth, indicating no urgent need for rate adjustments. Mester, known for her more cautious approach within the Fed, also indicated support for three rate cuts this year, although she considered it a “close call.”
China’s service sector growth quickens in March: Caixin PMI
China’s services sector showed growth in March, with new business expanding at its fastest pace in three months, signalling a tentative recovery in sentiment. The Caixin/S&P Global services purchasing managers’ index (PMI) rose to 52.7 from February’s 52.5, marking the 15th straight month of expansion above the 50-mark, Reuters reported. This acceleration in new business expansion is attributed to improving demand and efforts to boost fresh orders, leading to the strongest growth since December last year.
Tesla records first quarterly delivery decline in almost four years, shares drop sharply
Tesla faced its first quarterly delivery decline in nearly four years, failing to meet Wall Street estimates despite implementing price cuts. This disappointing performance led to a 5.2 per cent drop in shares, down to $166.08, resulting in a staggering $30 billion loss in market value, Reuters reported. As Tesla’s stock has dropped by over 30 per cent since the start of the year, the company, which was previously hailed as the world’s most valuable automaker, is now slowing down.
What’s on the radar
With the end of the earnings season, corporate updates have slowed down. Investors are now turning their focus to US employment figures, which are seen as the key economic indicator for the week. Additionally, attention is on various election events, including parliamentary polls in Kuwait, a run-off vote in Slovakia’s presidential election, and local polls in Poland within the next week, as reported by the Financial Times.
In the Eurozone, all eyes are on the release of flash inflation data for March, scheduled for Wednesday. This data holds significant importance, particularly amid speculation about potential interest rate cuts by the European Central Bank in June.
Heading into the middle of the week, investors are eagerly awaiting speeches from Federal Reserve officials, notably including Jerome Powell. Furthermore, at least four other influential Fed officials are expected to deliver speeches throughout the day. Before Powell’s address, the Institute for Supply Management will announce its Purchasing Managers’ Index for the US services sector for March.
The Japanese and Chinese monetary authorities are closely monitoring their currencies as they weaken against the US dollar. The yen is inching towards 152 per dollar, while the yuan has crossed the 7.2 per dollar mark. Japan has issued verbal cautions, whereas China’s state banks are intervening by buying yuan and selling dollars to counterbalance the trend.
Asian markets mirror Wall Street’s downturn
The S&P 500, Nasdaq Composite, and Dow Jones Industrial Average all experienced declines. The S&P 500 dropped by 0.72 per cent to close at 5,206.04 points, while the Nasdaq Composite fell by 0.95 per cent to 16,240.45. Similarly, the Dow Jones saw a 1.0 per cent drop, settling at 39,171.55. Most stocks within these indices concluded the day on a lower note, particularly in sectors such as healthcare, consumer cyclicals, and real estate.
In Asia, stocks followed the downward trend set by Wall Street, influenced by persistent high US yields and concerns stemming from a significant earthquake in the region, which could potentially disrupt the vital chip-making industry. Japan’s Nikkei 225 declined by over 1%, following an impressive 20 per cent rally in the first quarter. Taiwan’s shares also saw a roughly 1 per cent drop after a powerful earthquake with a magnitude of 7.2 struck Taipei, triggering a tsunami warning for the southern Japanese islands and the Philippines.
China’s blue chips witnessed a 0.4 per cent dip, while Hong Kong’s Hang Seng index fell by 0.61 per cent, despite a private survey showing accelerated expansion in the services industry in March.
Meanwhile, oil prices continued their ascent, bolstered by geopolitical tensions and the anticipation of unchanged output policies at an upcoming OPEC+ meeting. Brent crude rose to $89.05 per barrel, while US crude edged up to $85.2 per barrel. The benchmark US 10-year Treasury yield stood at 4.3451 per cent on Wednesday, having reached a four-month peak of 4.405 per cent overnight.
On the other hand, gold prices surged to unprecedented levels, reaching an all-time high during trading. Spot gold peaked at $2,288.09 per ounce earlier in the session, trading at $2,283.52, marking a 0.15 per cent increase.