The Reserve Bank of New Zealand announced a first rate rise in seven years
Wall Street stocks rallied overnight, erasing most of the losses from the previous day’s selloff. Fresh data showed that the ISM non-manufacturing activity index edged up to 61.9 last month from 61.7 in August. As such, the sector continued growing in September and at a faster pace than economists expected. As such, the S&P 500 index rose 1.05%, the Dow Jones gained 0.92%, and the tech-heavy Nasdaq climbed 1.25%.
Despite the recovery in the US markets, Asian stocks were lower on Wednesday amid ongoing worries about rising inflation, tightening monetary policy, and the Delta coronavirus variant. The Reserve Bank of New Zealand announced a first rate rise in seven years today. The central bank signaled that further removal of monetary policy stimulus is expected over time, contingent on the medium-term outlook for inflation and employment. Japan’s benchmark Nikkei 225 sank 1%, South Korea’s Kospi dipped 1.8%, Australia’s S&P/ASX 200 shed 0.70% and Hong Kong’s Hang Seng fell nearly 0.6%. Trading was closed in Shanghai for the national holidays.
European equities opened lower today, with the pan-European Stoxx 600 falling over 2.0% by late morning as the benchmark U.S. 10-year Treasury yield surged back above 1.56%. On the data front, German industrial orders fell more sharply than expected in August while Eurozone’s retail sales rose by 0.3% on a monthly basis in August versus 0.8% expected and -2.6% last.
In currencies, the dollar rallies across the board as Treasury yields are back on the rise while risk aversion persists in the global financial markets. Against this backdrop, EURUSD plunged to fresh mid-2020 lows around 1.1530, threatening the 1.1500 figure now. Later today, the ADP employment data could give an extra boost to the greenback if the figures come in higher than expected.
