Wall Street extends losses as jobs data backs higher rates

“This raises the question of whether the #Fed may slow down its #tightening process at some point over the next few months due to these expected trends, but while this is possible, recent data will not provide #markets much comfort that it happens anytime soon.”

At the close, the Dow was down 98.6 points at 32,899.37. A 1.4% drop in materials was the pace nine of the S&decline in the 11 industrial sectors of the P 500; energy rose 2.9%, reflecting higher oil prices. Utilities were also higher.

The VIX slipped 3.2% to 30.19.

Brad McMillan, chief investment officer at Commonwealth Financial Network, said there were reasons for optimism despite the selloff. “Economic conditions are normalizing, something we have been working towards for years. As part of this, the same applies to interest rates. Finally, as interest rates normalize, so do market valuations. All this is necessary and ultimately positive.

Among the overnight losers: Rupert Murdoch’s News Corp. The editor of the wall street journal and New York Postfell the most on record, leading to a sharp decline in media stocks.

News Corp shares fell 16% at one point. As of 4 p.m., it was 13.3% lower at US$17.11 in New York.

Media stocks were down sharply, with publishers, film and TV companies falling more than broader indexes. Major players including Netflix and Walt Disney hit lows for the year.

The yield on the US 10-year note rose 10 basis points to 3.14% at 4:31 p.m. in New York.

Mohamed El-Erian, a closely watched bond market strategist, told Bloomberg that the credibility of the US Federal Reserve was in question and will continue to be until it tells us “why the inflation forecasts were so wrong for so long and how to improve”. inflation methodology.

El-Erian also said Fed Chairman Jerome Powell was wrong to rule out a possible 75 basis point rate hike, saying the path of inflation was too uncertain.

“The mess we see in the market is about liquidity,” El-Erian said. “I’m willing to go all out and say that we primarily assessed interest rate risk. We have not assessed liquidity risk, we have not assessed credit risk, we have not assessed market operation risk. We are still in the process of pricing it. The days of abundant and predictable liquidity are over.

Market Highlights

ASX futures down 41 points or 0.6% at 7117 around 6:15 a.m. AEST

  • AUD -0.6% to 70.73 US cents
  • Bitcoin on bitstamp.net -1.1% to US$35,904.32 as of 6:30 a.m. AEST
  • On Wall St: Dow -0.3% S&P-500 -0.6% Nasdaq -1.4%
  • In New York: BHP -0.1% Rio -1.3% Atlassian -4.9%
  • Tesla -0.9% Apple +0.5% Amazon -1.4% Netflix -3.9%
  • In Europe: Stoxx 50 -1.8% FTSE -1.5% CAC -1.7% DAX -1.6%
  • Spot gold +0.3% at US$1,881.86/oz at 4:30 p.m. in New York
  • Brent +2% to $113.15 a barrel
  • US Oil +2.1% to US$110.58 a barrel
  • Iron ore -4.7% to US$139 per tonne
  • 2-year yield: United States 2.73% Australia 2.72%
  • 5-year yield: United States 3.07% Australia 3.20%
  • 10-year yield: United States 3.14% Australia 3.46% Germany 1.13%
  • US prices from 4:31 p.m. in New York

From today’s AFR weekend

Inflation anxiety is triggering chaos in markets: Global equities have plunged and bonds have returned to sell mode as fears of high inflation and slowing growth have intensified. The Bank of England has warned that inflation will hit 10% in the fourth quarter.

Japan’s ‘accidental governor’ explains why ultra-low is not the way to go: Critic of former Prime Minister Shinzo Abe’s ultra-low interest rates and economic reforms, Masaaki Shirakwa led the Japan’s monetary policy crisis after crisis during its turbulent stint as central bank governor.

United States

Elon Musk and Twitter were sued on Friday (Saturday AEST) by a Florida pension fund seeking to stop Musk from completing its $44 billion takeover of the social media company by 2025.

In a proposed class action lawsuit filed in Delaware Chancery Court, the Orlando Police Pension Fund said Delaware law prohibited a quick merger because Musk had deals with other big Twitter shareholders, including his financial adviser Morgan. Stanley and Twitter founder Jack Dorsey, to support the takeover.

Tesla aims to increase production at its Shanghai plant to 2,600 cars a day from May 16, it said in an internal memo seen by Reuters, as it seeks to restore production to pre-Tesla levels. city ​​shutdown to control COVID-19.

Under Armor forecast full-year profit below estimates as the sportswear maker grapples with higher transportation costs and a hit to its business from new COVID-19 restrictions in China.

Health insurer Cigna has raised its adjusted annual profit forecast, following lower COVID-related costs and no signs of pent-up demand for medical procedures delayed due to the pandemic.

Europe

European stocks recorded their worst week in two months on Friday, with tech stocks and retailers feeling the brunt of the sell-off.

The pan-European STOXX 600 index fell 1.9%, with retailers down 2.0% and technology stocks down 2.4%.

The retail trade index hit its lowest level in two years after a series of weak earnings reports that highlighted the fallout from soaring inflation, the war in Ukraine and a new series of blockages in China.

Adidas fell 3.6% as it lowered expectations for 2022 sales, with new COVID-related lockdowns in Greater China hitting the German sportswear company.

ING Groep, the largest Dutch bank, fell 4.7% as it posted worse-than-expected quarterly net profit, including an increase in provisions for bad debts due to its exposure to Russia and Ukraine.

Asia

The Hang Seng Tech index slid 5.2% on Friday, down for a fourth consecutive session to bring this week’s decline to nearly 10%.

On the mainland, the CSI 300 index fell 2.5%, while Hong Kong’s benchmark Hang Seng index fell 3.8%, the most since mid-March. Major equity gauges in Hong Kong and China all posted weekly losses.

“Although the valuation of Chinese tech giants has been largely shot down over the past year, we may need to see clear control of the virus situation in China or more supportive measures to bolster market confidence. “, said Jun Rong Yeap. , strategist at IG Asia Pte. “With backup catalysts such as earnings seasons and the Fed meeting largely behind us, markets need a new backup catalyst.”

Currencies

RBC Capital Markets Sees European Rate Hike in July: “Despite claims to the contrary, rate hikes announced by the Fed, BoC, BoE, RBA and other global central banks are putting pressure on the ECB to Meanwhile, inflation expectations have risen sharply while actual inflation continues to surprise on the upside.

“And so, being quite late in the global bullish cycle, the ECB’s primary focus shifts to dealing with mounting inflationary pressures quickly, just as downside risks to growth are intensifying.

“In light of this more hawkish rhetoric than expected, we are modifying our appeal to the ECB. We believe there is a growing consensus within the ECB that rate hikes need to be passed quickly to a) halt the rise in inflation expectations and b) start the tightening process before the growth does not slow down too dramatically.

RBC said it now expects the ECB to implement a 25 basis point rate hike at its July 21 policy meeting, and it expects “further rate hikes in September and December”.

RBC also sees two more increases in early 2023 before further increases “become more data dependent.”

“So we see the short-term peak at 0.75% to be reached before the summer of 2023, which is still below what the market is currently pricing.”

Merchandise

Benchmark Dalian and Singapore iron ore futures fell more than 5% in late trading on Friday as China tightened its tough response policy to the COVID-19 hitting activity economic, prompting traders to be more cautious.

The most traded iron ore in September on China’s Dalian Commodity Exchange ended the day down 5.1% at 825 yuan ($123.47) a ton, after rising four sessions.

On the Singapore Stock Exchange, the steel ingredient’s most active June contract fell 5.4% to US$137.45 a tonne at 0726 GMT, putting it on course for a fifth weekly loss.

China will fight all comments and actions that distort, doubt or deny the country’s COVID-19 response policy, state television reported Thursday, after a meeting of the country’s top decision-making body.

“Overall, we believe the priority issue for the Chinese government’s efforts to stabilize the economy is the authorities’ handling of the zero-COVID policy,” JPMorgan analysts said in a note.

The likelihood of a major policy reversal is low for the rest of this year, but they said there is room for improvement in implementation and lessening the disruption to economic activity.

“Without such policy improvement, it would be very difficult to bring growth in 2022 close to the 5.5% target,” they warned.

Traders hoped that China’s policy support for its slowing economy could continue to boost market confidence.

Australian Sharemarket

The ASX plunges 2.2% in the worst session since Russia attacked Ukraine: All 11 stock sectors closed lower on Friday, dragging the S&P/ASX 200 at a weekly loss of 3.1%.

With Reuters, Bloomberg

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