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Stock prices in Asia plunged today as investors worried about inflation after a surprise cut to oil production targets by the OPEC+ group, while Treasury yields plunged after weak US manufacturing data.
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Last week, OPEC+ announced a production cut, pushing oil prices higher and complicating the inflation outlook. Meanwhile, Brent crude (BRN1!) rose about 0.5% to $85.39 a barrel after rising more than 6% overnight. Investors also weighed economic data on Monday showing U.S. manufacturing activity plunged to its lowest in almost three years in March as new orders fell, with analysts saying activity could decline further as credit conditions tighten. ANZ analysts said the downturn had been in place since May 2022, but recent banking turmoil could further dent confidence. Manufacturing was also one of the sectors of the economy that was particularly sensitive to interest rate movements because goods such as cars are bought on credit, they said. MSCI's broadest index of Asia-Pacific shares outside Japan was flat. Japan's Nikkei index rose about 0.24%, while Australian shares (XJO) were also reported to have risen about 0.1%. China's blue-chip index fell slightly in early trading by about 0.16%, while Hong Kong's Hang Seng was also reported to have fallen about 0.64%.
Energy stocks rallied Monday to lift global stock indexes as the latest surprise OPEC+ production cuts sent oil prices to $100 a barrel. The S&P 500 energy sector index (SPN) rose 4.9%, led by CVX, XOM and OXY, which all gained more than 4%. However, rising oil costs could add to inflation concerns on Wall Street, just days after evidence of falling prices raised expectations that the US Federal Reserve will soon end its aggressive monetary tightening campaign. In addition, the DJI rose 0.98%, the S&P 500 gained 0.37%, while the IXIC fell 0.27%. This suggests that the US stock market remains relatively stable despite concerns about inflation and the Federal Reserve's monetary policy.
Tesla Inc (TSLA) shares fell 6.1% after disclosing that deliveries in the March quarter rose just 4% from the previous quarter. Although CEO Elon Musk cut car prices in January to boost demand, the results suggest that the effort has not had a significant impact on sales. Market observers note that the decline in Tesla shares also occurred amid concerns about inflation and a potential recession in the US. Currently, the Federal Reserve has also raised interest rates twice in 2022 to cool rising inflation. However, market observers are still trying to gauge how much longer the Fed may need to continue raising interest rates to control this rising inflation.
Treasury yields retreated after the release of US manufacturing data that showed a rise, but US construction spending weakened in February. This has led some investors to expect the Fed to cut interest rates later this year as the economy slows. In addition, the yield on the benchmark 10-year Treasury note or US10Y at the time of writing was at 3.4263%, down from the previous day's US close of 3.432%. The two-year yield or US2YT=RR rose on traders' expectations of a higher Federal Reserve (Fed) funds rate. The two-year yield reflects the difference between the two-year Treasury rate and the ten-year Treasury rate. The increase in the yield suggests that the market is pricing in the Fed raising interest rates soon. The two-year yield reached 3.9841% compared with the previous close of 3.98%. This represents a relatively small increase in the two-year yield. The US dollar weakened on Monday after the economic data was released. However, the dollar later reversed some of the losses but remained on the defensive. This could mean that the market is still wary of the US economic conditions and waiting for clearer signs before making any major investment decisions. The US Dollar Index (DXY) rose to 102.11. A rise in the DXY indicates that the US dollar is strengthening against a basket of currencies in its trading partners. EURUSD, the euro-US dollar currency pair, was slightly higher at $1.0904. This means that the euro has gained slightly against the US dollar. USDJPY, the US dollar-Japanese yen currency pair, was down 0.09% at 132.35. This means that the US dollar has lost a little against the Japanese yen. Gold was slightly lower and was trading at $1982.19 per ounce. This indicates a slight decline in gold prices.
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also read : Asian Stock Markets Plunge Amid Global Oil Rebound |
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