Morning Wrap: Wall St fades as yields rally, all eyes on RBA rate decision, ASX to open flat

ASX Futures (SPI 200) imply the ASX will open 5 points lower, down -0.07%.

The Wall Street rally couldn't hold as Treasury yields climbed, the Biden administration loosened its stance on tariffs, Elon Musk threatens to walk away from the Twitter deal and Apple reveals its very own ‘buy now, pay later’.  

Let’s dive in.

Markets

Major US indices pulled back from session highs as the US 10-year Treasury yield reclaimed the 3.0% level, reflecting expectations of persistent inflation.

• The US 10-year Treasury yield was on a 6-day win streak, rallying back above 3.0% for the first time since May 19

• 8 out of 11 US sectors advanced

• Discretionary, materials and industrials outperformed

• Energy and real estate underperformed

• 54% of US stocks were green

• 66% of US stocks trade below their 200-day moving average (68% on Monday, 68% a week ago)

Stocks

• DiDi Global (+24.3%) rallied after The Wall Street Journal reported that Chinese regulators would lift a ban on DiDi adding new users and reinstate the app in domestic app stores 

• Sunrun (+5.9%) and other solar companies including SunPower and Enphase Energy rallied after the Biden administration announced it would suspend tariffs on panel products to Southeast Asia 

• Amazon (+2%) has completed a 20-for-1 stock split. Last Friday, the stock was trading at US$2,447 pre-split, it closed at US$124.79 overnight

• Apple (+0.5%) is holding a developers conference where it will reveal new products, including its ‘buy now, pay later’ program called Apple Pay Later

• Twitter (-1.5%) after Elon Musk said he could terminate the takeover deal if the social media company does not provide information about spam and fake accounts

Economy

• China’s Caixin services PMI rose to 41.4 in May

  • The index is a private gauge of service activity

  • Bounced from a 36.2 reading in April

  • This is the third straight month that the services PMI remained below 50, which separates contraction from expansion 

Commodities

• Iron ore prices rose slightly amid limited trading activity, according to Fastmarkets

• Oil is starting to get exhausted after rallying to a 3-month high of US$120

• Gold prices dipped following a major move higher for US Treasury yields

It was a rather quiet overnight session. Most ETFs we watch were slightly higher, notably:

• Rare Earth/Strategic Metals +1.9%

• Copper Miners +1.25%

• Jets 1.1%

• Uranium +0.4%

The market seems to be in 'wait and see' mode ahead of the RBA interest rate decision as well as US inflation data on Friday.

#1 BNPL

Apple has announced its plans to step into the BNPL coliseum at its 2022 Worldwide Developers Conference.

"Apple Pay Later lets you split the cost of an Apple Pay purchase into four equal payments spread over six weeks with zero interest," said senior director of Apple Wallet and Apple Pay, Corey Fugman.

The reveal was lacking in details in terms of who will front up the initial purchase - e.g. if Apple pays the full cost of the item and you pay back Apple.

US-listed BNPL rival Affirm dipped -5.5%. While Block managed to close 0.3% higher. It's worth noting Block operates several financial services and digital payment services including Square terminals, the Cash App, crypto platform Spiral and more.

#2 Gold

Gold dipped to US$1,840 following the move from Treasury yields.

"The move in Treasury yields might be more of a reflection of a ton of supply that is going to hit markets, so the weakness for gold might not last too long," said Oanda senior market analyst, Ed Moya.

"Investors will fixate over Friday’s inflation report, which many believe should show that inflation is close to peaking. If the bond market selloff accelerates, gold could be vulnerable to a plunge towards the $1800 level."

(Source: TradingView)

ASX corporate actions occurring today:

• Ex-dividend: FPC

• Dividends paid: PCI, TCF

• Listing: UVA

• Issued shares: AHF, AIM, AKO, AON, ARR, BC8, DMM, EHL, FHS, FZO, ICN, JGH, KKO, LKE, LYN, M2M, MLS, MRI, NML, NRZ, OMX, PLS, PPS, RMD, SCL, SIH, SLM, SPN, SQ2, TGA, TWD, UOS, URW, UVA, WA1, WAT

Other things of interest (AEST): 

• RBA Interest Rate Decision at 2:30 pm

  • Consensus expects a 0.25% bps rate hike

• US Balance of Trade (April) at 10:30 pm