Overnight Headlines

*Asian stocks climb amid late Wall Street tech rally

*RBA scraps bond buying but remains patient on rate rise

*Fed officials see March rate hike, but no roadmap after that

*Dollar idles after sharp drop from recent cycle peak

US equities finished very strongly intraday, clawing back some of the losses from a dreadful month. Tech and growth led the way as the VIX dropped back below 30. The Nasdaq jumped +3.4%, the S&P500 was up +1.9% and the Dow higher +1.2%. Asian markets are mostly firmer with European futures in the green as they catch up with the late buying across the pond. US futures are mixed to begin the new month.

USD lost ground from the new cycle high at 97.44 made on Friday, sinking below the previous peak at 96.93. EUR/USD rose over a big figure from the 1.1138 low and sharply through 1.12. EUR/GBP climbed ahead of “Super Thursday” and the BoE and ECB meetings, bouncing off support around 0.83. AUD quickly recovered its losses after the RBA failed to hint at any upcoming rate hikes.

Market Thoughts – S&P500 suffers as rates rise

The US stock market endured its worst start to the year since 2008 as rising interest rates, geopolitics and slowing company earnings growth sent stocks tumbling. The S&P500 fell 5.3% last month, though it made back some gains yesterday after nearing its worst January on record last week.

Losses were led by tech with the Nasdaq Composite falling 9%, its worst one-month decline since November 2008. Rate-sensitive areas of the market have obviously been particularly hard hit, but the Russia tensions have seen energy prices ramp higher. This may hurt the growth cycle in Europe which will weigh on industrial activity. Corporate earnings have been slowing from last year’s peaks but are still expected to remain positive for most large companies. All eyes are on results from Alphabet, Meta and Amazon this week.

Chart of the Day – S&P500 rallies hard above 200-day SMA

 Yesterday’s move higher in stocks was led by the worst performing areas year-to-date, with tech, growth and small caps rallying hard into month-end. There was no single factor behind the positive sentiment, which can often be the case when markets are bottoming after a correction.

The recent spike low at 4,222 is the line in the sand with the S&P500 stabilising above here around 4,300 last week, amid strong intraday volatility. This support zone also supported prices in October. The 200-day SMA at 4,438, which had capped the upside recently, was broken with yesterday’s bullish burst. The December low at 4,495 is short-term support, with bulls aiming for last September’s high at 4,545 and the 100-day SMA at 4,569.