11 Aug 2022

​All three major U.S. stock indexes closed up last night. As of the close, the Dow rose 1.63%, the Nasdaq rose 2.89%, and the S&P fell 2.13%. The yield on the 10-year U.S. Treasury bond rose 0.44% to close at 2.785, a difference of about -44 basis points compared with the yield on the two-year Treasury bond. The VIX, the fear index, closed up 0.23%. Brent crude closed up 0.77%. Spot gold closed up 0.01% at $1,792.29 an ounce. The dollar index remained high, closing at 105.2.

The annual rate of the US CPI in July was 8.5%, the market expected 8.7%, and the previous value was 9.1%. The annual rate of core CPI was 5.9%, expected 6.10%, and the previous value was 5.90%. After the report was released, the US dollar index fell short-term, and the three major stock indexes rose. Institutional analysis said that the CPI data in July was lower than expected, which stimulated the sharp rise in U.S. Treasury bonds and led to a sharp sell-off in the Fed's futures swap contracts. Current price action reflects a higher than 75-basis-point probability of a 50-basis-point rate hike at the September meeting, and less than 100-basis-point rate hikes at the Fed's next two meetings combined. The three major stock indexes opened higher.

On the European situation, Ukraine received investor approval to defer debt payments until 2024. Winter supply risks loom as European gas prices recover. Ukraine has confirmed receipt of the transit payment, and the Russian oil pipeline transportation company has resumed the southern route of oil transportation via the "Friendship" pipeline; the 120-day "transition period" set by the European Union on the ban on the import of Russian coal will expire at midnight on the 10th, when The EU's coal embargo on Russia will come into effect.

John Velis, foreign exchange and macro Americas strategist at Bank of New York Mellon, pointed out that volatility in the bond market not only pushed up short-term U.S. Treasury bonds and pulled down short-term interest rates, but also prompted funds around the world to flock to short-term bills. For the vast majority of countries, especially developed markets, money poured into short-term bonds between the week ended Feb. 4 and the week ended Aug. 5, according to the bank's iFlow data. This phenomenon is most pronounced in the United States and the United Kingdom. Even the euro zone market went from a sell-off in February to a buy in August. Uncertainty about interest rates is likely to persist for at least several months, accompanied by excess liquidity in money markets, putting pressure on banks' reserve assets as central banks shrink their balance sheets. However, as the end of the cycle approaches, short-term bond rates should become more attractive. The three major stock indexes closed higher.

Apple rose 2.62%, Foxconn expects Q3 smartphone demand to slow.

Google rose 2.63% as the U.S. Department of Justice will sue Google over an alleged monopoly on digital advertising.

Tesla rose 3.89%. The Tesla 500-mile version of the Semi truck began shipping this year, and the electric pickup Cybertruck is expected to ship next year.

Sources from: Investing.com; Reuters.com

Louis Yap

Join me for more Stock Information
Telegram

Malaysia Bursa Channel​
​