Stocks dip amid fears over inflation, recession (英文版)


Stocks sink to 13-month low as US curve steepens. European gas drops as Russia tries to calm clients over payments. PBOC reiterates it will proactively deal with economic issues. Oil suffers biggest ...
新聞簡要10 May 2022
    圖片來源:法新社照片


    US

    Stocks tumbled to a 13-month low in a widespread selloff amid concern about the Federal Reserve’s ability to tame inflationary spirals without throwing the economy into a recession.

    The slide in the S&P 500 topped 3%, while the Treasury curve steepened, with the gap between 2- and 30Y rates hitting the widest since mid-March as short-dated bonds led the gains. Investors are increasingly worried about the limits to Fed policy at a time when supply chain disruptions pose a significant threat to inflation amid a ravaging war in Ukraine and China’s Covid lockdowns. Data Monday (9 May) showed US consumers project prices in three years to be higher compared with a month ago – a troubling sign for officials trying to keep longer-term expectations anchored.

    Pandemic-era stars bore the brunt of the selling, with Cathie Wood’s flagship exchange-traded fund sinking about 10% and an ETF tracking newly public companies down the most since the onset of the pandemic. Bitcoin slipped below USD32,000, falling more than 50% from its all-time high. The rout also spread to energy producers, easily the market’s strongest sector in 2022. The group plunged over 8% as crude slid. Big tech was not spared. The Cboe Volatility Index spiked to its highest in two months.

    Traders will be closely watching a host of central bank speakers this week after Chair Jerome Powell on Wednesday played down the option of 75 bps rate hike. Fed Bank of Atlanta President Raphael Bostic told Bloomberg Television he favours policymakers continuing to raise rates by half-point increments rather than doing anything larger. In a later interview with Reuters broadcast on Twitter, Bostic added that while he saw low odds for a 75 bps hike in the next several months, he’s “not taking anything off the table”.

    The April consumer price index report on Wednesday is the highlight of an otherwise quiet week for economic releases. Inflation is projected to have moderated on both a monthly and annual basis, partly reflecting a dip in gasoline prices that have since picked back up. While inflation likely peaked in March at 8.5%, the hottest in four decades, price pressures are expected to remain elevated, keeping Fed officials on track to steadily lift borrowing costs in the months ahead.

    High inflation readings, a slowing economy, and aggressive tightening by the Fed to rein in soaring prices have weighed on risk appetite and valuations. Even if an outright recession is avoided, the outlook for US stocks is not particularly bright, according to a group of strategists.

    “Swings will remain large until the path of inflation is clarified,” strategists wrote in a note to clients, adding that “tightening financial conditions and poor market liquidity make it difficult to argue for a short-term rally similar in size to the one in late March”. – Bloomberg News.

    The S&P 500 Index fell 3.20% to 3,991.24 on Monday, the Dow Jones Industrial Average declined 1.99% to 32,245.70, and the Nasdaq Composite Index closed 4.29% lower at 11,623.25.

     

    EUROPE

    Natural gas prices in Europe fell by the most in three weeks as top supplier Russia tried to reassure buyers that they can keep paying for gas without breaching sanctions.

    Benchmark futures closed 7.8% lower and power prices also fell. In a letter seen by Bloomberg, Gazprom told European clients that a new order published by the Kremlin on 4 May “clarifies the procedure” set out in the initial decree on ruble payments for gas. It is not yet clear if the new document will be enough to assuage the concerns of the European Union (EU).

    Poland and Bulgaria have already been cut off after they failed to meet Moscow’s new rubles-for-gas system. Other countries’ payment deadlines fall later this month.

    Ample supplies of liquefied natural gas (LNG) and warm weather are also bringing bearish sentiments. Temperatures are seen at above to well-above normal levels across mainland Europe and the UK for the next two weeks.

    Benchmark Dutch front-month gas closed at EUR93.79 per megawatt-hour after the biggest one-day drop since 14 April. The UK equivalent contract fell 6.4%. German year-ahead power declined 3%.

    “Overall LNG arrivals and hot spring weather continue to reduce worries about supply from Russia”, said a head of commodity strategy.

    More LNG may be available for Europe as cooler weather in many cities in Asia over the next two weeks reduce demand, BloombergNEF analyst Daniela Li said in a note.

    Still, traders and policymakers are closely watching Russia’s next moves, weighing up risks of a supply crunch later this year, especially during the winter heating season. Russia supplies about 40% of the EU’s gas demand, and flows would be hard to replace.

    “A perfect winter storm may be forming for Europe,” analysts at Rystad Energy said in a note, adding that there might be not enough LNG to replace Russian gas during the freezing weather. “The stage is set for a sustained supply deficit, high prices, extreme volatility, bullish markets, and heightened LNG geopolitics.”

    An immediate cut-off of Russian gas would send European prices to a range of EUR200 to EUR260 per megawatt-hour, Manuel Koehler, managing director for Germany at Aurora Energy Research, said on a webinar on Monday (9 May). – Bloomberg News.

    The Stoxx Europe 600 dipped 2.90% to 417.46.

     

    JAPAN

    Japanese Prime Minister Fumio Kishida said it would take time to phase out imports of Russian oil, hours after he joined other G-7 leaders to impose a ban on crude over the Kremlin’s invasion of Ukraine. 

    Kishida also told reporters in Tokyo on Monday (9 May) there was no change to the plan for Japan to retain its interests in the Sakhalin 1 and 2 Russian oil and natural gas projects.

    In a call with the other G-7 leaders and President Volodymyr Zelenskiy of Ukraine overnight, he said his government had decided to ban imports of Russian oil “in principle”, according to a statement from the Foreign Ministry.

    “It’s an extremely difficult decision for a country that imports most of its energy, but this is a time when G-7 unity is more important than anything”, Kishida said.

    The impact of the ban is likely to be limited, as the country imported only 3.6% of its crude oil from Russia in March, compared to 10.8% of its coal and 8.8% of its gas in 2021. Still, the move threatens to add to surging gasoline costs that have stoked inflationary fears.

    Japan has already announced plans to phase out imports of Russian coal, also without giving a deadline.

    The Kishida administration’s sanctions against Russia have proved popular with the public ahead of a key upper house election to be held in two months. Support for his cabinet rose 3 %pts to 62% in a poll published by TV network JNN on Monday, with 64% saying they approved of the government’s response to the war in Ukraine. – Bloomberg News.

    The Nikkei 225 Index opened 1.67% lower at 25,878.50 on Tuesday morning, extending its decline of 2.53% to 26,319.34 the previous session.

     

    MAINLAND CHINA & HONG KONG

    China’s central bank repeated a pledge to be proactive in addressing mounting economic pressure and boosting market confidence, while signalling a more dovish stance on property policies.

    The People’s Bank of China (PBOC) reaffirmed it will focus on supporting small businesses and also sectors and groups hit by Covid outbreaks, and vowed to use various monetary policy tools to keep overall liquidity ample, according to its first quarter monetary policy report published Monday (9 May).

     

    Recent Covid outbreaks “have caused a greater impact on the economy”, the PBOC said in the report, noting that the consumption sector has weakened, companies’ output was lower, and supply chain disruptions have increased. “We need to strengthen our confidence, take decisive actions, and actively overcome the challenges,” it said.

    Despite repeated pledges to support the economy and stabilise markets, the PBOC has been reluctant to adopt aggressive easing measures and has instead relied on new structural tools such as relending to provide financing help to targeted sectors. Investors were disappointed by its measured approach after it refrained since January from cutting policy interest rates and only provided a modest cash boost to banks in April.

    The PBOC also indicated it welcomed a relaxation of cities’ property controls, saying it supports authorities setting policy based on local conditions to meet demand from first- and second-time homebuyers.

    The weighted average deposit rates declined by 10 bps to 2.37% in the last week of April, the report said, noting that the PBOC gave unspecified rewards to banks which adjusted their rates in a timely manner. Bloomberg reported mid-April that the PBOC had urged banks to cut the rates, citing people familiar with the matter. A cut would help lower banks’ funding costs. 

    The central bank reiterated it will keep a close watch on inflation and support the supply of grain and energy in order to keep prices stable overall. It will also monitor the changes in advanced economies’ monetary policy, with the aim of achieving internal and external balance while setting its own agenda. – Bloomberg News.

    The Shanghai Composite Index upped 0.09% to 3,004.14 on Monday. Hong Kong’s markets were closed Monday for National Day.

     

    REST OF ASIA

    Indonesian stocks and bonds saw some of the sharpest selling in years as investors returned from a weeklong break amid heightened concern over rising inflation and slowing global growth.

    The Jakarta Composite Index slumped as much as 4.6%, the steepest drop for the equity benchmark since September 2020, while bonds tumbled, sending yields to the highest in nearly two years. The rupiah fell 0.4% to its weakest in more than nine months, putting the central bank on guard.

    First quarter gross domestic product figures that came in slightly above economists’ expectations did little to stem the declines. Inflation figures for April showed faster-than-forecast gains, underscoring unease over rising prices.

    While Indonesian markets were closed for the Eid al-Fitr holiday, stocks and bonds slipped across the region in the wake of the Federal Reserve’s interest rate increase.

    Indonesia’s 10Y government bond yield surged 27 bps to 7.26%, the highest since mid 2020.

     

    Bank Indonesia is ready to intervene in the market as needed to stabilise the currency, Executive Director for Monetary Management Edi Susianto said in a text message. The rupiah traded at 14,549 at 1:22 pm in Jakarta.

    Gross domestic product in the three months through March grew 5.01% from a year earlier, the country’s statistics agency said Monday (9 May). That compares with the median estimate in a Bloomberg survey for a 4.95% expansion, and a 0.7% drop in the same period last year.

    Inflation accelerated to an almost three-year high of 3.47% in April from a year earlier amid higher food and fuel prices. That was above expectations for a figure of 3.32%, though still at the midpoint of the central bank’s 2-4% target range. – Bloomberg News.

    The S&P/ASX 200 Index opened 2.13% lower at 6,953.10 on Tuesday (10 May) morning. The benchmark fell 1.37% to 7,104.30 the previous session.

    South Korea’s Kospi Index declined 2.01% to 2,558.40 in early Tuesday trading, after losing 1.27% to 2,610.81 on Monday.

    The Taiwan Stock Exchange Weighted Index shed 2.19% to 16,048.92.

     

    COMMODITIES

    Oil crumpled under the weight of a broader market selloff as the European Union (EU) softened some of its proposed sanctions on Russian crude to appease potential holdouts.

    West Texas Intermediate (WTI) futures in New York dropped over USD6.00 a barrel, the most since the end of March. The EU looked set to weaken its sanctions package on Russia, while Saudi Arabia cut its prices in a sign of flagging demand in top importer China. Equity markets retreated on concern over how much the Federal Reserve will have to boost rates to tame inflation. 

    Crude has had a tempestuous 2022 as Russia’s invasion of Ukraine upended global commodity markets, lifting prices. The US and the UK have already moved to ban imports of Russian fuel in response, but the weekend pledge by the G-7 will increase the pressure on Moscow further. Wider markets have also been roiled by the Federal Reserve’s aggressive rate hike path, adding volatility to crude trading.

    WTI for June delivery fell 6.09% to settle at USD103.09 a barrel in New York. Brent for July settlement dropped 5.74% to settle at USD105.94 a barrel.

    The EU will drop a proposed ban on its vessels transporting Russian oil to third countries, but will retain a plan to prohibit insuring those shipments, according to documents seen by Bloomberg and people familiar with the matter. Over the weekend the leaders of the G-7 countries made a vow to ban imports from Russia. But most nations cutting Russian purchases have so far stressed the need for orderly change, allowing much of the rest of the year to wind down.

     

    Beyond the ongoing war, Saudi Arabia cut prices for buyers in Asia as Covid-19 lockdowns in China weigh on consumption in the top importer. State-controlled Saudi Aramco lowered prices for the first time in four months, dropping its key Arab Light grade for next month’s flows to USD4.40 a barrel above the benchmark.

    Still, oil markets remain in backwardation, a bullish pattern marked by near-term prices commanding a premium to those further out. The spread between Brent’s two nearest December contracts touched USD13.99 a barrel, close to the level seen in the initial weeks after Russia began its invasion. – Bloomberg News.

     

     

    CURRENCIES

    The yuan plunged more than 1% against the dollar in China on Monday (9 May), outpacing declines in most Emerging Market currencies as concerns over the nation’s economic slowdown mount.

    The onshore currency fell to a low of 6.7321, its weakest since November 2020, after data showed export growth in April slowing to just 3.9% as Covid outbreaks bite. A lack of notable dollar selling from state-owned banks also weighed on sentiment, according to traders who asked not to be identified as they are not authorised to comment on the foreign exchange market publicly.

    The marked decline raises questions over how far the People’s Bank of China will let the yuan weaken, with the currency often seen as an anchor for peers in the region given the extensive trade links. The central bank set the yuan’s reference rate at a stronger-than-expected level for a fifth day on Monday, a sign that the authorities are seeking to slow the depreciation.

    The two-year rally in the yuan has abruptly reversed since last month as a Covid outbreak prompted the government to lock down cities including Shanghai. Meanwhile, bond yields in the US have climbed above China’s, leading to record fixed income outflows. The yuan’s 4% drop in April marked the record depreciation since the official China Foreign Exchange Trade System started compiling the data in 2007.

    The yuan is dropping so quickly that it has outstripped the new forecasts made by analysts and traders. Just at the end of April, a survey of 11 traders and analysts by Bloomberg show the yuan is expected to drop to 6.7 per dollar in three months. It was trading at 6.3620 at the start of April. 

    The PBOC will use the many tools it has for counter-cyclical adjustments if the yuan fluctuates too much, China Securities Journal said in an article earlier on Monday. Vowing to keep the normal operations of the foreign exchange market, the central bank also reiterated its pledge to keep the basic stability of the currency at a “reasonable and balanced level” in its first-quarter monetary policy report released Monday. 

     

    Late last month, the central bank lowered the foreign currency reserve ratio to 8% from 9%, a move aiming to support the yuan by adding more dollar supply. Analysts said the PBOC could further cut the reserve ratio, should the yuan decline accelerate. – Bloomberg News.

    On Monday, the US Dollar Index fell 0.01% to 103.651, the euro rose 0.09% to USD1.0561, the pound lost 0.13% to USD1.2332, and the yen strengthened 0.21% to 130.29 per dollar.

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