EQUITIES
Shares in Asia-Pacific were mixed on Thursday trade. In Japan, the Nikkei 225 led the decline regionally, as it fell more than 1%. South Korea’s KOSPI slipped 0.37%, while Australia’s S&P/ASX 200 and the S&P BSE Sensex in India both shed around 0.23%.
Elsewhere, the mainland Chinese stocks rose, as the Shanghai composite traded 0.17% higher, while the Hong Kong’s Hang Seng index added 0.28%. Over in Southeast Asia, Singapore’s Straits Times index gained 0.26%.
Overnight on Wall Street, the Dow Jones Industrial Average fell 0.77%, to 34,033.67, the S&P 500 lost 0.54%, to 4,223.7 and the Nasdaq Composite dropped 0.24%, to 14,039.68.
OIL
Crude oil prices fell on Thursday pressured by a stronger U.S. dollar, though losses were limited by a big drop in crude oil stockpiles in the U.S.
The Brent traded at $73.97 per barrel, and U.S. crude futures traded at $71.74 per barrel.
Overnight, the Brent reaching its highest since April 2019 before running into profit taking, to close at $74.39, while WTI ended at $72.15 per barrel.
CURRENCIES
The benchmark 10-year Treasury yield rose on the Fed news, while the dollar index, which tracks the greenback against six major currencies, rose to a 6-week peak.
The benchmark 10-year yield rose to its highest level since June 4 at 1.594%, and the U.S. dollar boasted to 91.381.
Cryptocurrencies were also hurt by the dollar’s strength, with bitcoin traded below $39,000 following a 4.5% slide Wednesday, and ether at around $2,400 after a 7% selloff.
GOLD
Gold prices rose on Thursday as investors took advantage of a sharp fall in the previous session to buy the metal after the hawkish comments from Fed officials signalled it might raise interest rates sooner than expected.
The spot gold advanced at $1,821.90 an ounce and jumped to $1,823.00 per ounce for gold futures. Previously closed at $1,811.90 and $1,861.40, respectively.
Silver slipped 2.16% to $27.210 per ounce, platinum eased 1.6% to $1,123.40, while palladium shed 2.4% to. $2,769.00
ECONOMIC OUTLOOK
Asian markets set for a rough ride on Thursday, as investors watched for market reaction after the U.S. Federal Reserve on Wednesday stunned investors by signalling it might raise interest rates at a much faster pace than assumed, sending yields and the dollar sharply higher.
FOMC meeting outcome
Fed’s decision to maintain interest rates at the current level of 0%-0.25%, a widely expected move.
Officials projected an accelerated timetable for interest rate increases, opened talks on how to end crisis-era bond-buying and said the 15-month-old health emergency was no longer a core constraint on U.S. commerce.
The Fed brought forward the time frame on which it will next raise interest rates. The so-called dot plot of individual member expectations pointed to two hikes in 2023.
Futures on the federal funds rate, which track short-term interest rate expectations, raised bets that the U.S. central bank will tighten monetary policy in early 2023 after Fed projections showed at least two rate increases that year.
The Fed now expects the economy to grow 7% this year.
Several commodity prices dropped following China’s announcement of a campaign to control raw material prices by expanding its oversight of commodity trading and pledging to release the nation’s reserves of base metals.
EIA showed that U.S. crude oil stockpiles dropped sharply last week as refineries boosted operations to their highest since January 2020, signalling continued improvement in demand. The crude stocks dropped 7.4 million-barrel to 466.7 million barrels in the week to June 11, the fourth consecutive weekly decline.
TECHNICAL OUTLOOK
[USDJPY]
Important Levels to Watch for Today:
- Resistance line of 111.086 and 111.480.
- Support line of 109.810 and 109.416.
Commentary/ Reason:
Against the Japanese yen, the dollar traded flat at 110.673 yen, but not before rallying 0.6% overnight to start the trade today at its highest since April 1.
The yen lost its ground against the U.S. dollar at the opening today as the greenback surged after the U.S. Fed hinted at raising interest rates in 2023, a hawkish surprise.
A surge in the 10-year T-note yield to a 1-1/2 week high also undercut the yen.
A surge in dollar looked set to test its 2021 peak at 110.96. USD/JPY has moved to test it as bullish momentum accelerated in yesterday’s trading. A break has not yet materialised, and we may expect further oscillations before a full break is established. Momentum indicators are beginning to decelerate in bullish territory.
