Expectations of a 100 basis-point US interest rate hike in July receded somehow
Wall Street indices fell on Thursday as investors were disappointed by quarterly earnings from big banks which added to recession fears along with the possibility of even tighter US monetary policy from the Federal Reserve. The Dow Jones Industrial Average shed 0.46%, the S&P 500 dipped 0.3% and the Nasdaq Composite inched less than 0.1% higher to bounce from session lows eventually. In individual stocks, JPMorgan Chase shares plunged 3.5% after the bank added to reserves for bad loans and halted its share buybacks. Morgan Stanley reported a sharp decline in investment banking revenue.
In Asia, stocks were mixed as recession fears kept growing while expectations of a 100 basis-point US interest rate hike in July receded somehow, easing the pressure on markets. China’s Shanghai Composite was down 1.56% and Hong Kong’s Hang Seng gave up more than 2% as tech stocks drop while China’s GDP missed expectations. China’s GDP grew 0.4% in the second quarter, compared with 4.8% in the first quarter and 1% expected. In Japan, the Nikkei 225 gained 0.54% while MSCI’s broadest index of Asia-Pacific shares outside Japan shed 0.33%.
European equities opened slightly higher on Friday, with the pan-European Stoxx 600 index adding 0.4% after the opening bell. However, the upside potential remains limited at this stage, especially amid the resurgent political uncertainty in the region after Italy’s president rejected Prime Minister Mario Draghi’s offer to resign. The mood in US stock index futures looks subdued today, with major indices shedding 0.2$ in early pre-market deals ahead of the US retail sales data due later today.
As for currencies, the US dollar index rallied to fresh two-decade highs above the 109.00 figure on Thursday before retreating marginally amid profit-taking. The buck peaked at 109.30 to settle in the 108.60 area in early European deals on Friday. As such, EURUSD briefly dipped below parity towards the 0.9950 zone for the first time since 2002. Now, the pair is back around 1.000 but downside risks continue to persist, suggesting the shared currency is yet to find a bottom. Should the selling pressure intensify further, EURUSD may dip towards 0.9600.