Daily Market Outlook, April 26, 2022

Overnight Headlines

Asian shares bounced up on Tuesday after a late revival on Wall Street, though global growth fears stoked by China's strict COVID-19 curbs and an expected streak of aggressive Federal Reserve tightening sapped risk appetite.

The nervousness about China's economic slowdown, however, hit Australian shares, with the local benchmark down 2% by early afternoon, hurt particularly by declines in miners. Japan's Nikkei stock index pared earlier gains and was down 0.04% by early afternoon. U.S. stock futures were little changed in Asia trade.The lockdown in Shanghai, and the spread of cases in other big cities like Beijing, is weighing on the growth outlook for the world's second largest economy and investment sentiment.

Markets have also been fretting that an aggressive pace of tightening by the U.S. Fed could derail the global economy, which has only just started to recover from the pandemic. The Fed is expected to raise rates by a half a percentage point at each of its next two meetings. Lockdown in China's financial hub has dragged into a fourth week, as authorities stick to their "dynamic zero-COVID" policy to combat the latest outbreak of Omicron cases.

In currency markets, the dollar was in fine fettle on safe-haven demand. China's offshore yuan was steadier, at 6.5558 per dollar after the People's Bank of China said late on Monday it would cut the amount of foreign exchange banks must hold as reserves.That helped it recover from a year-low of 6.609 per dollar on Monday, hurt by fears about China's economic growth. The dollar was higher against most peers, with its index against a basket of rivals at 101.58, just off its overnight two year peak. Benchmark U.S. 10-year yields ticked up to 2.8566% in early afternoon deals. Treasury yields retreated on Monday from hawkish Fed-induced highs, as the China lockdown and growth fears sent investors to the safety of U.S. bonds.

US releases include durable goods orders and new home sales data today, as well as the Conference Board consumer confidence report. Durable goods orders are expected to partially recovery from the drop in March, but markets will be looking to see to what extent geopolitical uncertainties and supply bottlenecks will restrain activity going forward. For US housing, sales overall seem to show some signs of higher interest rates already having an impact, although housing starts appear to be holding up for now. US consumer confidence, meanwhile, is expected to broadly steady in April with the strong labour market providing an offset for concerns about inflation. The Conference Board measure has not fallen by as much as the University of Michigan survey which showed an unexpected rise in consumer sentiment in April.

EUR/USD: 1.0700 (757M), 1.0725 (815M), 1.0735 (461M) 1.0750 (1.05BLN), 1.0785-90 (500M), 1.0795-05 (2.07BLN) 1.0900-10 (560M), 1.0995-00 (544M)
USD/JPY: 126.75-80 (850M), 128.00 (655M)
GBP/USD: 1.3170 (200M)
AUD/USD: 0.7125 (298M), 0.7145-50 (574M) 0.7170 (395M), 0.7220 (1.22BLN), 0.7350 (741M) 0.7370-75 (754M).
AUD/JPY: 88.25 (684M), 90.80 (703M)
USD/CAD: 1.2675 (655M), 1.2785 (740M)
NZD/USD: 0.6830 (565M). AUD/NZD: 1.0800 (396M)