EQUITIES
Shares in Asia-Pacific were lower on Wednesday trade. The Shanghai composite in mainland China declined 0.82% while the Hong Kong’s Hang Seng index shed 0.58%. In Japan, the Nikkei 225 slipped 0.24% while the KOSPI in South Korea dipped 0.33%, and the S&P BSE Sensex in India lose 0.25%. The Singapore’s Straits Times index shed 0.18% despite the 14.3% increase of its Q2 GDP.
Meanwhile, the S&P/ASX 200 in Australia bucked the overall trend, to edge 0.13% higher.
Overnight on Wall Street, the S&P 500 and Nasdaq reached fresh record highs before fell into negative territory to end the day lower. The Dow Jones Industrial Average fell 0.31% to end at 34,888.79 points, while the S&P 500 lost 0.35% to 4,369.21, and the Nasdaq Composite dropped 0.38% to 14,677.65.
OIL
Oil prices steadied following a tighter supply expectation due to disagreements among major producers. The Brent now traded at $76.25 per barrel, and U.S. crude futures traded at $74.90 per barrel.
Overnight, the Brent closed at $76.49, while WTI ended at $75.25 per barrel.
CURRENCIES
The U.S. bond yields and the dollar were lower in Asian trade after jumping a day earlier on the inflation data.
The benchmark 10-year yield slipped to 1.400% from a close of 1.415% on Tuesday. while the dollar index, which tracks the greenback against a basket of currencies of other major trading partners, nudged down to 92.732 after earlier rising as high as 92.832.
Kiwi dollar sent higher after the Reserve Bank of New Zealand (RBNZ) announcing it was ending its bond purchase programme from next week, although held interest rates unchanged.
GOLD
A subdued dollar and drop in U.S. Treasury yields helped gold prices to edge higher. The spot gold rose to $1,813.00 an ounce and added to $1,814.10 per ounce for gold futures. Previously closed at $1,807.30 and $1,809.90, respectively.
ECONOMIC OUTLOOK
Asian shares fell on Wednesday following a hotter-than-expected U.S. inflation report overnight, fuelled some market expectations that the Federal Reserve could exit pandemic-era stimulus earlier than previously thought.
Data indicated U.S. CPI surged 5.4% in June as compared with a year earlier— its fastest pace in nearly 13 years, while the core CPI surged 4.5% YoY, the largest rise since November 1991, topping all forecasts.
The International Energy Agency (IEA) in its monthly report yesterday said the oil market should expect tighter supply for now due to disagreements among the OPEC+ members over additional output levels. Industry data by API on U.S. stockpiles showed that oil and gasoline inventories declined last week. Crude stocks fell by 4.1 million barrels for the week ended July 9, marking its eighth consecutive weekly decline. The official U.S. government data is expected later today.
JPMorgan Chase & Co and Goldman Sachs Group Inc reported higher-than-expected quarterly earnings. Citigroup, Wells Fargo & Co and Bank of America were due to report their quarterly results early on Wednesday.
All eyes now turn to Fed Chair Jerome Powell's congressional testimony on Wednesday and Thursday for his comments about rising price pressures and monetary support going forward.
TECHNICAL OUTLOOK
[USDJPY]
Important Levels to Watch for Today:
- Resistance line of 110.763 and 110.946.
- Support line of 110.173 and 109.990.
Commentary/ Reason:
The U.S. dollar touched a 1-week high versus the yen on Wednesday, after heated U.S. inflation spurred bets of faster monetary policy tightening than Fed officials have so far signalled.
The dollar rose to 110.696 yen for the first time since July 7, before dropping 0.11% against the Japanese unit to 110.497.
The Japanese yen is strengthened on the day after the local bourse fell for two straight sessions since yesterday. Gains in yen also supported by the T-note yields that moved lower today, which is bearish for the dollar.
Some additional support of yen also came on speculation Japanese PM Suga may seek to add an extra budget to help shore up economic growth before general elections in October. Speculation about an extra budget increased when Japan Liberal Democratic Party Secretary-General Nikai, a political heavyweight in the ruling party, called for a $271 billion stimulus package after the government put Tokyo under a fourth state of emergency due to rising COVID-19 infection rates.
The USD/JPY pair is poised to extend its advance in the near-term, likely stay on the ascending trendline for now as price action traces the resistance area and moves higher.
Investors awaiting Fed Chair Jerome Powell’s congressional testimony on Wednesday and Thursday is in focus for his comments about rising price pressures and monetary support going forward.
