sharemarket – Michmutters
Categories
Business

UK braces for long recession after biggest interest rate hike in 27 years, ASX to open flat

Australian shares are likely to start the day relatively flat, after the Bank of England announced its biggest interest rate hike in 27 years and warned of a long recession for Britain.

ASX futures were up 0.1 per cent, to 6,891 points, by 8:40am AEST.

The Australian dollar was trading at 69.6 US cents, after rising 0.2 per cent overnight. This was largely due to a weaker US greenback.

It follows a lackluster session on Wall Street, which saw the Dow Jones index fall 0.3 per cent, to 32,727 points, the S&P 500 lose 0.1 per cent, to 4,152, and the Nasdaq Composite gain 0.4 per cent, to 12,721.

“The market is looking for direction after a strong bounce that highlighted the deep pessimism that had permeated the markets,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management.

“Many signs indicate that [US] inflation has peaked and the question now turns to how quickly it will come down or whether stickier components will keep it higher than the Fed [Federal Reserve] is comfortable with.”

Recession fears were also on the minds of oil traders, and the possibility this could sink energy demand, as crude prices dropped to their lowest level since before Russia’s invasion of Ukraine in February.

Brent crude plunged 3.6 per cent, to $US93.34 a barrel.

Spot gold jumped 1.5 per cent to a one-month high of $US1,792 an ounce.

Recession for the UK

Britain’s central bank raised interest rates by 0.5 percentage points on Thursday evening (AEST), its biggest increase since 1995.

This was despite the BoE warning that a long recession was on its way, as it rushed to smother a rise in inflation which is now expected to peak at 13.3 per cent in October — up from its previous forecast of 11 per cent.

.

Categories
Business

ASX to rise, Wall Street snaps two-day losing streak as tech stocks rebound

Australian shares are expected to start the day higher as US technology stocks rebounded overnight, lifting the Nasdaq to a three-month high.

ASX futures were up 0.5 per cent, to 6,913 points, by 7:50am AEST.

The Australian dollar was trading at 69.5 US cents, after a 0.5 per cent rise overnight.

Wall Street’s main indexes rebounded, after dropping for the past two days.

The Nasdaq jumped 2.6 per cent, to 12,668 points, its highest level since early May, and the S&P 500 climbed 1.6 per cent, to end the session at 4,155, while the Dow Jones index rose 1.3 per cent, to 32,813.

Spot gold rose 0.2 per cent, to $US1,763.10 an ounce.

Meanwhile, oil prices fell sharply, with Brent crude futures down 3.4 per cent, to $US97.10 a barrel.

It comes after the OPEC+ group of oil-producing nations, including Saudi Arabia and Russia, announced that it would increase its supply by a mere 100,000 barrels per day.

On top of that, a new report from the Energy Information Administration showed an unexpected surge in US crude and gasoline stocks.

“Oil is still up 25 per cent from the beginning of the year,” said Oliver Pursche, senior vice president at Wealthspire Advisors in New York

“This recent drop is a combined result of that and a reflection that there is going to be an economic slowdown. The market is trying to find equilibrium.”

Stronger-than-expected earnings

Investor sentiment was also boosted by strong earnings reports from PayPal, CVS Health Corp and other companies.

.

Categories
Business

ASX falls sharply, Wall Street sinks on US-China tension and economic uncertainty

Australian shares have dropped in morning trade, as ongoing economic uncertainty and flaring US-China tensions weighed on global market sentiment.

The arrival of US House of Representatives Speaker Nancy Pelosi in Taipei, despite warnings from Beijing, prompted China to launch war plans and buzz the Taiwan Strait in protest.

The ASX 200 dropped by a steeper-than-expected 0.9 per cent, to 6,938 points, by 10:35am AEST.

Nearly every sector traded lower, with utilities and materials suffering the biggest losses. Seven out of every 10 stocks were in the red.

Some of today’s worst performers include Champion Iron (-5.3pc), APA Group (-3.2pc), Seven Group (-3.2pc) and Eagers Automotive (-3.2pc).

On the flip side, some of the best performing stocks were Pinnacle Investment Management (+10.7pc), Block (+4.9pc), and Lynas Rare Earths (+4.6pc).

Aussie dollar sinks

The Australian dollar fell 0.4 per cent, to 68.9 US cents. That was on top of its sharp loss of 1.5 per cent overnight.

The sell-off began yesterday, when the Reserve Bank lifted its cash rate target by 0.5 percentage points, which takes the new rate to a six-year high of 1.85 per cent.

The weaker Australian dollar was also driven by a stronger US greenback as investors piled into currencies that are seen as “safe havens”.

In that regard, the Japanese yen jumped 0.9 per cent against the greenback, and was on track for a fifth day of gains, its longest winning streak since 2020.

“There is the uncertainty surrounding Pelosi’s trip to Taiwan and there’s additional data, regarding economic softness,” said Sam Stovall, chief investment strategist of CFRA Research.

“Regarding recession [in the United States]it’s not a question of ‘if’ but ‘when’ and how deep.”

‘An open question’ about further rate hikes

On Wall Street, the S&P 500 slipped by 0.7 per cent, to end the session at 4,091 points.

.

Categories
Business

ASX set to fail, ahead of Reserve Bank’s likely interest rate hike of 0.5 per cent

Australian shares are set to open lower, ahead of the Reserve Bank’s widely-expected interest rate hike this afternoon which will lead to another sharp rise in mortgage repayments.

ASX futures were down 0.3 per cent, to 6,880 points, by 8:25am AEST.

The Australian dollar was trading at a six-week high of 70.2 US cents, following a 0.6 per cent rise overnight.

According to many Australian economists, the most likely outcome of today’s RBA announcement will see the central bank lift it cash rate target by a larger-than-usual 0.5 percentage points.

This would take the new rate to 1.85 per cent, a big jump since the record low of 0.1 per cent in May. It would also be the highest cash rate since April 2016.

The central bank is expected to keep lifting rates aggressively over the coming months, as it desperately tries to bring inflation down from its 21-year high.

Effectively, it will do so by lifting rates to a level that makes consumers feel poorer so they visit the shops less, and spend more on their loan repayments.

House prices are also feeling the crunch. Since interest rates begin to rise sharply in May, property values ​​have dropped by 2 per cent — the fastest drop since the onset of the global financial crisis in 2008, according to figures from CoreLogic.

‘A lot of questions’ about the economic downturn

The local share market is also likely to follow a weak lead from Wall Street, which we see-sawed on Monday, local time, as crude oil prices plunged and the looming possibility of US recession curbed the appetite for taking risks.

.