EQUITIES
Shares in Asia-Pacific traded in negative territory on Wednesday, mirroring peers on Wall Street and as investors digesting China's services sector activity data release.
Hong Kong's Hang Seng index was down 1.42%, moving away from a one-month high hit on Monday. The Shanghai composite lost 0.22% as markets in mainland China reopened after two days of public holidays.
Chinese tech stocks in Hong Kong dropped, after tech-heavy Nasdaq posted its biggest daily percentage drop in about a month overnight. Alibaba falling 4.04% and Meituan declining 2.81% while Tencent shed 1.85%. In Japan, shares of SoftBank Group shed 2.46%, and over in South Korea, Kakao shares declined 2.80% and Naver slipped 3.07% while SK Hynix fell 3%.
The Japan’s Nikkei 225 slipped 1.65% while in South Korea, the KOSPI dipped 0.94%. The S&P/ASX 200 in Australia declined 0.60%, and in Southeast Asia, Singapore’s Straits Times index slipped 0.55%.
Overnight on Wall Street, the benchmark S&P 500 closed 1.3% lower to 4,525.12, the Dow Jones Industrial Average fell 0.8%, to 34,641.18, and the tech-heavy Nasdaq Composite dropping 2.26% to 14,204.17, with declines in heavyweight stocks such as Apple Inc and Amazon.com Inc.
OIL
Oil futures were mixed on Wednesday, recovering from early losses, as the threat of new sanctions on Russia raised concerns about supply disruptions, countering fears of weaker demand following a build in U.S. crude stockpiles, Shanghai's extended lockdown, and stronger dollar.
U.S. crude and distillate stocks rose last week while gasoline inventories dipped, according to market sources citing API figures on Tuesday. Crude stocks rose by 1.1 million barrels for the week ended April 1, against analysts' forecast of a decline of 2.1 million barrels.
Meanwhile, member states of the IEA were still discussing how much oil they would together release from storage to cool markets, adding that an announcement was expected in coming days. The decision of the coordinated release was made on Friday last week.
Brent crude futures rose 1.04%, to $106.78 a barrel, having fallen to $106.64 in the previous session.
The U.S. West Texas Intermediate futures meanwhile were down to $101.81 a barrel, from $101.96 in in the previous session.
Brent fell 0.8% on Tuesday and WTI lost 1.3%.
CURRENCIES
The dollar index rose to 99.608, the highest since late May 2020, boosted by hawkish comments from Federal Reserve officials on Tuesday who pushed for a quick reduction in the central bank's bloated balance sheet. The U.S. dollar also continued to march higher as risk aversion remained prevalent as Western allies are expected to up the ante on their sanctions against Russia.
Investors also continue to monitor moves in U.S. Treasurys. The 10-year Treasury rose to its highest level since May 2019 on Tuesday, hitting a high of 2.562%, and was at 2.607% on Wednesday. The U.S. 2-year yield meanwhile is at its highest level since January 2019, while the 5-year yield its highest since December 2018. A topping of the 2-year Treasury yield against the 10-year rate, which happened last week before the recent reversal, has historically been observed ahead of recessions.
Bitcoin was slightly softer around $45,338.
GOLD
Gold dips on Wednesday as hawkish comments from U.S. Fed officials boosted the dollar and Treasury yields to multi-year highs, denting the safe-haven metal's appeal.
Spot gold was down 0.15% at $1,920.60 per ounce, and U.S. gold futures fell 0.20% to $1,923.40.
Spot silver edged 0.1% lower to $24.28 per ounce, platinum shed 0.3% to $964.90 and palladium was flat at $2,237.05.
ECONOMIC OUTLOOK
Asian share markets slipped on Wednesday as investors digesting China's services sector activity data release and faced up to the possibility of aggressive monetary tightening by the U.S. Federal Reserve to tame inflation, while remained concerned on new Western sanctions against Russia over its invasion of Ukraine.
Tech and growth shares led the decline today, with higher rates seen as a negative for growth stocks.
Activity in China's services sector shrank at the steepest pace in two years in March as China continues to battle its worst Covid outbreak since the beginning of the pandemic in early 2020. The Caixin services PMI declined to 42.0 in March, well below February’s reading of 50.2 as well as the 50 mark. The reading was also the lowest since February 2020.
The unresolved tensions of Russia-Ukraine also expected to limit the upside potential over the near term. Proposed EU sanctions, which the bloc's 27 member states must approve, would ban buying Russian coal and prevent Russian ships from entering EU ports. Britain also urged G7 and NATO nations to agree a timetable to phase out oil and gas imports from Russia. European coal futures rose to a three-week high.
Up next, focus on the Fed will continue on Wednesday, as traders will be looking for minutes from the Federal Reserve’s latest policy meeting to guide expectations for how rapidly the bank plans to increase rates and reduce its bond holdings. The ECB will publish its equivalent minutes on Thursday.
