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Markets Dip Mid-Week; AUD Up, Powell Speech Ahead

Tuesday saw a little decline in U.S. stocks as Wall Street continues to have a slow start to the week. Investors are still keeping an eye on China’s COVID policy and are anticipating Federal Reserve Chair Jerome Powell’s speech. However, the Australian Dollar drifted sideways despite soft Chinese data. 

The major Wall Street indices were expected to close Tuesday’s tumultuous trading session lower as investors anticipated Federal Reserve chairman Jerome Powell’s statement on the country’s economic prospects. A decline in major technology corporations was partially offset by gains in the real estate and energy sectors. 

Concerns regarding protests in China over COVID-19 lockdowns, hawkish remarks from a Federal Reserve speaker, and turbulence in the cryptocurrency markets caused all three averages to conclude the previous day much lower.

Before a busy Wednesday that includes Powell’s speech as well as a plethora of economic data, such as the Q3 GDP report and the ADP jobs report, investors seemed hesitant.

The tech-heavy Nasdaq Composite (COMP.IND) was down 0.66% entering the last half hour of trade. The NASDAQ Composite Index is 10,983.78 as the Tuesday session comes to an end. Over 4.66 billion shares were exchanged for the NASDAQ as a whole.

Nasdaq Composite Index

Nasdaq Composite Index

The benchmark S&P 500 (SP500) dropped to 3,954.07 points, down 0.25 percent. The S&P 500 fell more than 1%, marking the first post-Thanksgiving Monday loss since 2008

S&P 500 (^GSPC)

S&P 500 (^GSPC)

The advances in the Dow (DOW), American Express (AXP), and Boeing helped the Dow (DJI) outperform the other two indices (BA). The blue-chip index stood at 33,813.69 points, down 0.11% from the previous day.

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Stocks Trade Lower

Six of the 11 S&P sectors were trading lower, led by a more than 1% decline in the utilities and technology sectors. The two sectors with the largest gains were real estate and energy.

After a major analyst predicted that shipments of the iPhone 14 Pro could be far lower than anticipated, Apple’s (AAPL) stock plummeted by 2%. Amazon (AMZN) fell 2% as well.

On Tuesday, Chinese equities recovered on expectations that the country’s rigid COVID restrictions will change. After licenses were conditionally renewed over the weekend, Macau casino stocks increased their gains for the second day in a row.

According to Jim Reid of Deutsche Bank, “global markets got off to a poor start yesterday, with the S&P 500 (-1.54%) and other risk assets losing ground as investors sought to grasp the effects of the ongoing Covid issue in China.”

“On the one hand, it’s possible that other lockdowns, like the ones we witnessed in Shanghai in Q2, will occur in the coming months. However, it’s also conceivable that the demonstrations prompt a quicker abandonment of the zero Covid plan, which, going by previous results, would be largely encouraging, “Added he.

HSBC (HSBC) shares increased among stock movers after the Royal Bank of Canada (RY) decided to buy its Canadian operations.

In addition, traders might hesitate to make risky wagers in favor of holding off until Fed Chair Jerome Powell speaks later during the US session. The US economic data, including the JOLTS Job Openings survey, the Prelim Q3 GDP report, and the ADP report on private sector employment, could give the USD some support in the interim.

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Other Markets Affected

Looking at the bond markets, yields had increased. While the 2-year yield (US2Y) increased just a little to 4.48%, the 10-year Treasury yield (US10Y) increased by 5 basis points to 3.75%.

Following a decline brought on by BlockFi’s bankruptcy, the price of bitcoin (BTC-USD) and Ethereum (ETH-USD) in the cryptocurrency market increased.

As expected, the October S&P/CS house price index declined by 1.2%. The September FHFA house price index unexpectedly ticked up 0.1% as traders assessed two sets of housing data. 

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Australian Dollar Gains

After local statistics showed slowing economic activity and the Chinese PMI failed expectations, the Australian Dollar fell twice today. After the commotion, the price of the currency quickly returned to its initial location before rising above 67 cents.

Chinese manufacturing PMI for October came in at 48.0, missing expectations of 49.0, and non-manufacturing came in at 46.7, below expectations of 48.0. As a result, the composite PMI reading decreased from 49.0 to 47.1.

A survey of 3,000 manufacturers in China, mostly large businesses, produced the China PMI indices. Since it is a diffusion indicator, a value above 50 is considered to be favorable for the outlook of the second-largest economy in the world.

Australian private sector credit for October indicated projected growth of 0.6% month-over-month an hour before the Chinese PMI was released. This resulted in an annual read of 9.5% year over year, which was also within expectations.

Building approvals for October also indicated a fall of -6.0% month-over-month, far less than the expected -2.0% and after the prior number of -5.8%.

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EuroZone CPI and ECB Reaction

We get our first peek at this month’s inflation data from the EuroZone on Wednesday. This information is crucial for the shared currency since it will be the information the ECB will use to determine its interest rate in two and a half weeks. The Flash November CPI’s outcome will probably determine the trend of the euro till the ECB meeting.

The head of the ECB emphasized that there would be additional rate increases, but he would not offer any details. Before inflation is effectively under control, Lagarde stated that policy is still “accommodative” and may need to shift into the restrictive area. The ECB would discuss quantitative tightening at its subsequent meeting, she added.

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Author

  • Phyllis Wangui

    Phyllis Wangui is a Financial Analyst and News Editor with qualifications in accounting and economics. She has over 20 years of banking and accounting experience, during which she has gained extensive knowledge of the forex, stock news, stock market, forex analysis, cryptos and foreign exchange industries. Phyllis is an avid commentator on these topics and loves to share her insights with others through financial publications and social media platforms.