Market sentiment remained unstable after the U.S. holiday, as investors worried that global central banks would take aggressive measures to curb inflation, which could lead to a recession. U.S. stocks opened lower on Tuesday (5th).
Before the deadline, the Dow Jones Industrial Average fell more than 500 points or nearly 1.7%, the Nasdaq Composite fell more than 165 points or nearly 1.5%, the S&P 500 fell nearly 1.7%, and the Philadelphia Semiconductor Index fell nearly 2.2%.
U.S. Treasury Secretary Yellen had a video chat with Chinese Vice Premier Liu He, but the U.S. Treasury Department press release did not mention tariffs or sanctions, while the Chinese Ministry of Commerce stated that China is concerned about the removal of U.S. tariffs and sanctions on China, fair Deal with Chinese companies and other issues.
It was previously reported that U.S. President Joe Biden could announce as soon as this week that he would lift some tariffs on $300 billion of Chinese-made goods. While the news gave markets a sigh of relief, investors remained concerned about a potential U.S. recession and entrenched inflation.
In terms of individual stocks, fears of a recession affected the performance of some stocks. Carnival Cruise Lines (CCL-US) fell more than 4% in premarket trading, and ASML (ASML-US) fell more than 7%.
In European news, bets on the European Central Bank’s (ECB) rate hike this year were cut to less than 140 basis points, down from more than 190 basis points three weeks ago, after France revised down the Markit services PMI today. The interest rate gap between it and the U.S. Federal Reserve (Fed) widened. Affected by this, the euro fell against the dollar in a short-term, and fell 1.1% to 1.0304 during the session, continuing to hit a new low since 2002.
In addition, in order to combat inflation, the Reserve Bank of Australia announced today that it will raise the main lending rate by 0.5 percentage points to 1.35%.
In energy, crude oil fell alongside other commodities as markets worried about the outlook for the global economy. In addition to the weak Eurozone PMI, the imposition of a seven-day temporary control measure in Xi’an, China, also had an impact. Meanwhile, Citigroup analysts warned that crude oil prices could fall to $65 a barrel by the end of the year as global economic growth slows.
In addition, European gas prices rose as much as 3%, mainly due to a decline in output due to a strike by Norwegian oil and gas workers demanding pay rises.
As of 21:00 on Tuesday (5th) Taipei time:
Stocks in focus:
Tesla (TSLA-US) fell 3.83% to $655.69 a share in early trade
According to Tesla’s production and delivery report for the second quarter of 2022, global deliveries in the second quarter were 254,965 vehicles, down 17.9% from the first quarter and lower than market expectations, mainly due to the impact of China’s new crown epidemic on production. In addition, Tesla delivered 564,000 vehicles globally in the first half of the year, an increase of 46% from 386,200 in the first half of last year.
Occidental Petroleum (OXY-US) fell 4% in early trade to $58.02 a share
Berkshire Hathaway (Berkshire Hathaway), who is in charge of “stock god” Buffett, submitted a document to the US Securities and Exchange Commission (SEC) last Friday, showing that the company bought a total of 9.9 million again on June 29 and July 1. Shares in Occidental Petroleum Corporation at a cost of about $582 million, increasing the shareholding ratio to 17.4%.
AstraZeneca (AZ-US) fell 1.26% to $65.12 a share in early trade
AstraZeneca (AZ) said today it will buy biotech company TeneoTwo for $1.27 billion to boost the company’s blood cancer research business. AZ stated that it has agreed to buy all of TeneoTwo’s outstanding shares, with an advance payment of US$100 million before the transaction is completed, and related payments of up to US$1.17 billion later. In addition, the deal includes the US company’s experimental treatment for a type of non-Hodgkin’s lymphoma.
Today’s key economic data:
- The monthly growth rate of U.S. factory orders in May was 1.6%, expected 0.5%, and the previous value was 0.7%
- The monthly growth rate of U.S. durable goods orders in May was revised to 0.8%, expected to be 0.7%, and the previous value of 0.7%
Wall Street Analysis:
Joachim Klement, head of strategy, accounting and sustainability at Liberum Capital, said the Fed is likely to continue to aggressively fight inflation for now, while European growth is slowing, fueling investor concerns about U.S. growth.
Under the influence of inflation and the Russia-Ukraine dispute, the euro has fallen by more than 8% against the dollar this year. Derek Halpenny, an analyst at MUFG, said it would be difficult for the euro to rebound in any meaningful way amid a deteriorating energy situation and significantly increased risks to economic growth.
