A sizable big sell-off in tech shares hit Wall Street overnight. The Nasdaq fell as much as 3% as rising global interest rates weighed on risk assets, and many shifted their focus away from companies that have benefitted from the pandemic, and towards securities poised to benefit from the end of lockdown and the easing of restrictions. While the tech-heavy Nasdaq was the biggest loser, the Dow fell 1.6% and the S&P 500 was 2.2% lower. The ‘Gamestop’ saga is still running its course, with the Reddit-favored share making a comeback. European shares were also generally lower overnight, though the moves were not as dramatic.
Bond yields continued their climbs overnight, with some sizeable lifts in yields. With economic data proving resilient and investors increasingly pegging higher inflation, global bond yields were higher virtually everywhere in North America and Europe, continuing the trend that was evident in the local market yesterday. The move was most dramatic for the US 5-year Treasury yield, which reached a one-year high at 0.79%, and the US 10-year yield also rose to its highest levels since February 2020, at 1.60%. Yields were similarly up across the curve in Europe.
The market moves are being driven in part by the latest US economic data, which has been strong. Overnight, data prints showed US durable goods orders surged 3.4% in January, well ahead of expectations (mkt: 1.1%). Jobless claims also fell to a three-month low at 710k well down from 841k a week ago and below expectations (mkt: 825k), though the outright number of unemployed remains high at 19m. Fourth-quarter US GDP was also revised up slightly to 4.1% qoq annualised, in line with expectations.
Attention now turns to passage of the $1.9 trillion package championed by the Biden administration. The House of Representatives is set to pass the package over the weekend, before sending the bill to the Senate, where it is also favoured to win approval. Biden aims to aims to sign the bill before March 14, when a number of key unemployment programmes are set to expire.
In commodity markets, energy commodities paused for breath overnight, but prices for some metals continued to grind higher. Brent crude has settled at USD$66.55 a barrel, after reaching highs not seen since the beginning of the pandemic. Copper prices hit 10-year highs overnight. Aluminium and Iron Ore prices were also higher overnight, in line with the pickup in activity increasingly expected by markets.
In NZ market, trends evident in the aftermath of Wednesday’s RBNZ MPS continued to assert themselves. NZ Swap yields continued their climb, with the 2s10s curve continuing to steepen. Bond yields were also up across the curve (10-year up as much as 19bps to 1.87%) with a steepening bias similarly evident. Similar patters were evident in the Aussie market, despite the RBA making bond purchases for the second time this week in a bid to dampen yields. The NZX50 fell 1.15% over the day, continuing its divergence from rising global sharemarkets. Equity indices were generally higher across the Asia-Pacific, benefitting from the strength in global sharemarkets seen the day before.
Yesterday also saw the finalised ANZ Business Confidence for the month. Most indicators were slightly below the preliminary readings, and the story was broadly one of consolidation after the sharp rise evident in December. Inflation pressures were another theme, with rising freight costs a key driver.
FX Update: After its move up in the aftermath of Wednesday’s MPS, the NZD was broadly lower against most of the majors overnight. The NZD/USD pared back to around 0.7380, still near recent highs. The NZD/AUD did lift slightly to around 0.9360.