- Asian stocks saw a sell-off, following Wall Street’s footprints.
- The pessimistic confidence of US consumers has shaken market sentiment globally.
- A stable US PCE price is in itself a damaging catalyst for currencies perceived as risks.
Markets in the Asian domain fell sharply as pessimistic US consumer confidence crossed borders and rattled investor sentiment globally. Lower-revised US consumer confidence caused a sell-off on Wall Street on Tuesday and a similar trend was followed in Asian indices. The US Conference Board reported consumer confidence at 98.7, below estimates of 100, and the older version at 103.2.
At press time, the Japanese Nikkei225 fell 1.18%, the China A50 fell 1.00%, Hang Seng plunged 1.51% and Nifty50 fell 0.66%.
A pessimistic US consumer confidence shows a lower confidence of US individuals in the growth prospects of the US economy. There is no doubt that soaring fossil fuel and food prices have reduced growth forecasts and households are facing headwinds from lower value “paychecks”. It also leads to lower consumer spending on durable goods and consumer products and, eventually, a fall in aggregate demand.
Meanwhile, the US Dollar Index (DXY) is hovering below 104.50 awaiting a speech from Federal Reserve (Fed) Chairman Jerome Powell. The Fed Powell is expected to sound hawkish while hinting at likely monetary policy action in July. Apart from that, US economic data is of significant importance. The release of personal consumption expenditure (PCE) in the United States will monopolize the attention. The market consensus points to an unchanged US PCE at 7% on an annual basis, which is also vulnerable for US consumer confidence. A significant drop in the price of PCE in the United States is the need of the hour.
On the oil front, oil prices experienced a minor correction after a firmer recovery. Black gold is holding above $111.00 at the start of the European session. Supply constraints will continue to drag on as the OPEC cartel is unable to fill Moscow’s tight supply.