ASX futures were 65 points, or 0.9 per cent, lower at 7497 at 8.00 am on Friday – a negative indication for the last trading day before a three-day weekend.
The S&P 500 dropped 1.5%, wiping out its 1 percent jump Wednesday following better-than-expected earnings. The Dow Jones Industrial Average fell 1%. The Nasdaq Composite fell 2.1 percent, extending losses from a day earlier after a sell-off in Netflix shares dragged down the technology sector.
Shares of Tesla surged 3.2% after the electric-vehicle manufacturer posted $3.3 billion in quarterly profits late Wednesday, its highest profit to date.
Bonds continued their decline along the yield curve after a brief rally on Wednesday. The US 10 year Treasury note climbed to 2.91% and the 2 Year 2.68% as market pricing solidified for 0.5% rate hikes at the US Federal Reserve’s next three meetings. That would push US interest rates to between 1.75% and 2% by July.
In comments Thursday in Washington D.C., Fed Chairman Jerome Powell said a 0.5% rate hike “will be on the table” at the central bank’s May meeting. He also seemed to endorse “frontloading” of rate increases. Doing several large hikes in rapid succession to reach the “neutral” level, just above 2%, was once the position of the most hawkish members of the bank but is now gaining traction as the Fed wrestles with rising inflation.
The S&P/ASX 200 also moved into the black locally on Thursday, closing 0.3% to the good at 7592.8, having ended just short of a record after five consecutive advances.
The benchmark index overcame negative leads from both the S&P 500 and Nasdaq Composite to follow the DJIA higher.
The now heavyweight financial sector rose 1.1%, with banks ANZ, Westpac, NAB and Commonwealth up between 0.3% to 1.0%.
Challenger, the best performing index component, jumped 9.8%, followed by pallet supplier Brambles which rose 8.0% after lifting its annual guidance.
Takeover target Ramsay Health Care added another 3.7%, while materials and tech stocks trimmed broad gains.
The ASX 200 finished 0.5% shy of its record of 7628.92, set in August 2021.
In commodities, iron ore was down 0.4% at US$150.05 a tonne, gold futures fell 0.4% to US$1,948.20, while Brent crude oil gained 1.9% to US$108.83.
The yield on the Australian 10 Year bond was down to 3.08% in local bond markets.
The Aussie dollar was fetching 73.69 US cents at 7.00am, lower than the previous close of 74.49. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, climbed to 93.23.
Asia
Chinese stocks closed down, following weakness in their counterparts in Hong Kong, as worries about the countries’ slowing economy and vague pandemic policy kept sentiment on a downward trajectory. The benchmark Shanghai Composite Index closed down 2.3 percent at 3,079.81, and the Shenzhen Composite Index finished down 3.1 percent at 1,923.81. The ChiNext Price Index dropped 2.2% to close at 2312.46. The tourism industry suffered most, with tourism agency China CYTS Tours sliding 6.8% and operator of tourism-attraction site Emei Shan Tourism tumbling 8.7%.
Hong Kong shares fell further, extending losses for a third day as sentiment remained weak on the back of China’s Covid-19 rebound and expectations for a significant economic slowdown in 2Q. The Hang Seng Index closed 1.3% lower at 20682.22. Chinese internet giants spearheaded the decline, following the sector’s brutal losses on Wall Street overnight. JD.com plunged 6.5% and Meituan dropped 4.9%.
Japan’s Nikkei Stock Average closed up 1.2% at 27553.06, with the electronics and machinery sectors leading gains as concerns over elevated borrowing costs subsided. The BOJ conducting rate-capping operations in the JGB market has helped the Nikkei, Oanda’s senior market analyst Jeffrey Halley wrote in an email. Lasertec Corp. gained 6.3%, Disco Corp. added 4.3% and Daifuku rose 4.1%, and Tokyo Electron was up 3.6% and Renesas Electronics 3.05%. USD/JPY stood at 128.17, against 128.69 at the close of Tokyo’s stock market on Wednesday.
Europe
The Stoxx Europe 600 climbed 0.3 percent and the German DAX jumped 1 percent. France’s CAC 40 rose 1.4% after a pre election debate that polls deemed a win for the incumbent, pro-business President Emmanuel Macron over far-right challenger Marine Le Pen.
Airline stocks jumped after United Airlines and American Airlines became the latest US carriers to report they expect a return to profit. Akzo Nobel was up 6.5% after the Dulux paint maker released 1Q earnings that beat analysts' forecasts. Kinnevik fell 10.0% after the investment company reported a fall in 1Q net asset value.
London’s FTSE 100 index ended flat, falling by 0.02% on Thursday after weakness in basic resources left it lagging the broader market, according to CMC Markets UK Chief Market Analyst Michael Hewson in a research note.
Anglo American and Antofagasta followed on Wednesday with disappointing first-quarter production figures after Rio Tinto, Hewson says. Rentokil shares were up however, closing 1.8% higher, after a rise in first-quarter revenue and comments that it was trading in line with expectations.
The top gainer on the day was ITV, which rose 6.5%, while British Airways owner the International Consolidated Airlines Group was second at 6.2%. Anglo American, which cut its guidance, was the farthest in the red, down 8.8%.
North America
US stocks fell Thursday, wiping out their earlier-day gains as a selloff in government bonds intensified.
This year, investors have had to balance signs of relatively solid economic activity with fears that the Federal Reserve will move too quickly to tighten monetary policy, risking a market stumble. Stocks have had a strong run over the last few years, and many credit that in part to extraordinary levels of monetary support from central banks.
With the Fed set to raise rates several times this year and also unwind its $9 trillion balance sheet, some money managers say they are concerned that risky assets may find it difficult to maintain the momentum of recent years. Fed Reserve Chairman Jerome Powell signaled on Thursday that the central bank was likely to raise interest rates by a half percentage point at next month’s meeting.
The prospects for raising interest rates tamed inflation fears, but concerns that the Fed might raise rates faster than expected had fueled selling in Treasurys. The yield on the 10-year US Treasury note soared from 2.836% Wednesday to 2.917% Thursday, its highest level since December 2018.
The renewed rise in bond yields added new pressure to the stock market. Higher rates can also weigh on stocks because they lower the boost investors receive from holding riskier assets instead of Treasurys.
The S&P 500 fell 1.5%. The Nasdaq Composite fell 2.1 percent, building on losses from Wednesday after a sell-off in Netflix shares dragged down the technology sector. The Dow Jones Industrial Average fell 1%.
Some analysts say they think US stocks have more room to run even with the Fed normalizing monetary policy as long as the economy remains strong. So far, roughly 80% of S&P 500 companies that have released earnings results for the most recent quarter have topped analysts’ forecasts, according to FactSet.
“Despite all the negative macro headlines, the Russia-Ukraine conflict, higher inflation, China’s zero-COVID policy, U.S. corporate profits prove resilient,” said Michael Arone, chief investment strategist for the SPDR business at State Street Global Advisors.
Tesla rose $31.58, or 3.2 percent, to $1,008.78, after the electric-vehicle manufacturer reported $3.3 billion in quarterly profits late Wednesday, its biggest profit ever. American Airlines Group shares climbed 74 cents, or 3.8 percent, to $20.22 after the carrier said that revenue more than doubled in the first quarter.
Outside of earnings, labour market data has indicated the US economy is on a solid footing, Mr. Arone noted.
“I don’t think the rise in rates should be that matters until you start to see the economic data fall over,” he said.
Technology shares which are often sensitive to shifts in interest rates were among the biggest laggards in the market on Thursday.
Advanced Micro Devices fell $4.17, or 4.4 percent, to $89.85 and Salesforce fell $9, or 4.8 percent, to $177.23.
Crude oil prices, meanwhile, increased on indications that Russian oil production is declining and that Europe is moving to end imports of Russian crude altogether. US crude-oil prices gained 1.6%, trading at $103.79 a barrel. Germany said Wednesday that it would stop purchasing Russian oil by the end of the year.
