Summary: U.S. equity index futures rallied today in Asian trading after S&P 500 dipped into but finally avoided entering bear market territory at the close last Friday. Chinese equities, on the other hand, retraced from recent rally amid surge of COVID cases and partial lockdowns in five districts in Beijing.

What’s the big picture?

Investors have shifted their focus from the pace of Fed rate hikes and slowdown in the Chinese economy to the risk of a U.S. recession. After hitting a high at 3.20% on May 9, U.S. 10-year treasury note yield has retraced 40bps lower to 2.80% in response to the prospect of slower U.S. growth. We remain cautious of general equities amid the risk off mood, while S&P 500 closed lower for the 7th consecutive week and briefly entered bear market territory. Meanwhile, select Agri business stocks and industrial metals continue to hit new highs.

What’s happening in markets?

Agricultural stocks shine as Wheat prices remain elevated with global wheat supplies running out. Diversified agribusiness Elders (ELD) upgraded its earnings guidance, upon citing Australian crop conditions will bolster, and cattle and sheep prices will remain high, which will push its earnings 30% higher than last year’s record. Meanwhile,

US dollar on a bearish trend in Asia amid risk-on. The US dollar continued to lose ground in the Asian hours as risk sentiment was rather upbeat, and gains were led by commodity currencies. NZDUSD rose above 0.6450 as RBNZ is expected to announce a 50bps rate hike this week. AUDUSD caught a bid as well following a clear victory for the Labor party in Australia’s election at the weekend but AUDNZD saw a downside bias. USDJPY broke below the key 127.50 level again but Fed minutes due this week will be a key input for yield spread direction. GBPUSD gained 1.8% last week and was seen extending the gains to 1.2500+ in Asia.

https://www.fxmag.com/forex/recession-fears-sent-s-p-500-briefly-in...