Early Morning Call: US, APAC equity markets fall while USD rises
Europe expected to open down after Wall Street indices hit 6/7-week lows as UST yields surged; APAC markets also down. USD/JPY at 24-year highs; watching USD/CAD ahead of expected 75-bps BoC rate hike to 3.25%.
Equity markets overview
APAC equity markets recorded another session of losses, following the lead of US indices yesterday.
The Nikkei is trading at a seven-week low, while Hong Kong’s Hang Seng is closing down on long-term support, after China's trade surplus unexpectedly dropped to a three-month low in August, mainly because of a softer rise in exports. The ASX 200 fell 1.43%.
Major economic news
Australia's economy expanded by 0.9% in the second quarter (Q2) compared to the previous one, below the 1% expected by economists, but higher than the first quarter's (Q1) 0.7% rise. On a year-on-year (YoY) basis, growth accelerated to 3.6%.
In Europe, indices opened the session lower. German industrial production fell by 0.3% in July month-on-month (MoM). Economists had anticipated a 0.5% fall.
In the UK, Halifax house prices rose by 0.4% in August on a month-on-month basis, bouncing back after last month’s 0.1% fall. At 10am, Eurostat will release the second estimate of Eurozone Q2 gross domestic product (GDP) growth rate. Economists forecast a 0.6% increase quarter-on-quarter (QoQ).
In the US, markets await the July trade balance at 1.30pm. Tonight, the Federal Reserver (Fed) will give its update on the current economic situation with the publication of the Beige Book at 7pm.
Forex overview
The dollar continues to strengthen with the dollar index now trading above 110, a first since June 2002.
Against the yen, the greenback hit a fresh 24-year high. And in a context of global policy tightening, the Japanese currency continues to spiral down against major currencies as the Bank of Japan (BoJ) remains convinced its ultra accommodative stance to support the Japanese economy is the right path to follow. The BoJ has also been boosting its purchase of Japanese bonds which also weakens a currency.
The Bank of Canada (BoC) is set to deliver a fourth consecutive outsized interest rate hike to slow the Canadian economy and drag inflation down from four-decade highs.
All 31 economists surveyed by Bloomberg expect policymakers, led by Governor Tiff Macklem, to raise the benchmark overnight rate by at least 50 basis points, and most say it will be 75 basis points. That would bring the policy rate to 3.25%, the highest amongst major economies.
Earnings overview
Barratt Developments PLC has meanwhile announced a share buyback worth £200 million while posting record annual profit. Adjusted pre-tax profit rose about 15% to £1.05 billion for the year ended June 30, in line with market expectations. Revenue rose by 9.5% to £5.27bn.
Halfords Group PLC has confirmed its full-year guidance, expecting profits to be higher in the second half (H2) of the year.
Commodites
On the commodity front, oil prices are down this morning. WTI and Brent have both broken support and now trade at eight-month lows.
Gold is also trading lower, having fallen overnight below $1,700.
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