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The yield on German two-year government bonds rose 7 basis points to 2.342% as money market bets increased on a rate hike by the European Central Bank; the probability of a rate hike in July is 80%, and a rate hike in September is fully priced in.Two sources say the International Energy Agency (IEA) will recommend using its strategic petroleum reserves, given the potential disruption to oil supplies due to the situation in Iran. The initial release from the IEAs strategic petroleum reserves will exceed 100 million barrels in the first month.On March 11, Barclays Bank predicted that if oil prices remain around $100 per barrel and economic growth remains stagnant, the earnings per share (EPS) growth rate for European companies is likely to fall to a low single digit, and the Stoxx Europe 600 index will drop to around 550 points. Historically, during periods of stagflation, the energy, utilities, and healthcare sectors have outperformed, while the financial, telecommunications, and consumer sectors have tended to lag. In a report, the bank stated that although the energy intensity of the economy has decreased over time, economic growth still faces risks because Europes dependence on Middle Eastern energy supplies is as high as 30%.Italian Prime Minister Meloni: Another priority is to support small and medium-sized enterprises within the new European Competitiveness Fund to promote the balanced flow of EU resources in all our regions.March 11th - Analysts say the situation since the US and Israels attack on Iran indicates that the US remains the preferred market for investors. Even with its flaws, the US remains a global hub of innovation and boasts the worlds deepest and most liquid markets, qualities that become indispensable during economic shocks. After 14 months of turmoil, weve also seen signs of resilience from the Federal Reserve and the Supreme Court, providing additional sources of confidence. It continues to be at the forefront of artificial intelligence, a net oil exporter—a stark contrast to energy-consuming Europe in terms of economic standing—and dominates defense contracting and "defense technology." War and high oil prices are far from purely beneficial, but their negative impact on the US economy is far less than in other parts of the world. This makes it possible that, in critical moments, global investors desire for US assets remains greater than for any other country, and this situation is unlikely to change in the short term.

Hang Seng Index, ASX200, Nikkei 225: RBA Sends the ASX Down

Alice Wang

Feb 07, 2023 15:32

Market Overview

It was a mixed morning session. There were no US economic indicators from Monday to influence market sentiment. The Hang Seng and the Nikkei found support despite the renewed threat of US interest rates peaking above 5%.

However, with Fed Chair Powell speaking overnight, we could see caution resurface. The last Fed press conference preceded the jobs report, with softer inflation supporting a less hawkish policy outlook. Powell could shift gears today as the markets await the US CPI Report for January.

This morning, economic indicators from Asia delivered mixed results, while the RBA raised interest rates by 25 basis points.


ASX 200

The ASX 200 was down 0.50% this morning. Australian economic indicators had a muted impact on the ASX200 ahead of the RBA monetary policy decision.


In December, the Australian trade surplus narrowed from A$13.20 billion to A$12.237 billion. Exports fell by 1.0%, while imports increased by 1.0%. While the numbers were bearish, hopes of resuming trade ties with China following talks on Monday muted the impact.


However, the RBA sent the ASX200 into the red later in the morning. While lifting rates by 25 basis points to 3.35%, which was in line with expectations, the RBA warned of more rate hikes. The hawkish outlook was bearish for the ASX200.


This morning, bank stocks had a mixed morning. ANZ Group (ANZ) was up 0.22%, while Commonwealth Bank of Australia (CBA) was down 0.59%. National Australia Bank (NAB) and Westpac Banking Corp (WBC) saw losses of 0.35% and 0.46%, respectively.


Mining stocks also had a mixed session. BHP Group Ltd (BHP) and Rio Tinto (RIO) were down 0.33% and 0.83%, respectively, while Fortescue Metals Group (FMG) rose by 0.64%. Newcrest Mining (NCM) continued to find support on the news of US mining company Newmont Corp’s $17 billion bid, rising by 1.67%

Hang Seng Index

The Hang Seng found much-needed support this morning, rising by 0.90%.


Tencent Holdings Ltd (HK:0700) was up 1.75%, with Alibaba Group Holding Ltd (HK:9988) rising by 1.65% through the morning.


Bank stocks joined the broader market in the green, with Industrial and Commercial Bank of China (HK:9988) and China Construction Bank (HK: 0939) seeing gains of 1.25% and 0.60%, respectively.


However, CNOOC (HK: 0883) and ENN Energy holdings had a mixed morning. CNOOC rallied by 2.69% through the morning, while ENN Energy Holdings (2688) slipped by 0.17%.


Risk aversion could hit in the afternoon session, however. The investor focus will turn to Fed Chair Powell, who delivers a speech overnight.

Nikkei 225

The Nikkei 225 was up 0.22% this morning. While joining the broader market in positive territory, the gains were modest. The USD/JPY weakened this morning, falling 0.28% to 132.25, with economic data from Japan also weighing.


In December, household spending unexpectedly fell by 2.1%, following a 0.9% decline in November. The fall in spending came despite a marked pickup in wage growth. Average cash earnings were up 4.8% year-over-year versus 1.9% in November.


Fast Retailing Co (9984), Softbank Group Corp (9434), and KDDI Corp (9433) struggled this morning. Softbank Group Corp was down 0.82%, with Fast Retailing Co and KDDI Corp down 0.17% and 0.18%, respectively.


However, Tokyo Electron Ltd (8035) found much-needed support, rising by 0.67%, with Sony Corp (6758) up 0.21%. Advantest Corp (6857) was a front-runner among the most weighted stocks, rallying by 1.85%.

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