Australian shares have started the day higher, tracking gains on Wall Street.
Key points:
The ASX 200 has lost 5 per cent since the year began
On Friday, the Dow Jones index rose 1.3 per cent, the S&P 500 gained 1.7 per cent and the Nasdaq Composite added 2.1 per cent
Meanwhile, the pan-European STOXX 600 index rose 0.2 per cent
The ASX 200 was up 35 points, or 0.5 per cent, to 7,067, at 10:16am AEST.
At the same time, the Australian dollar was flat, at 71.17 US cents.
Shares of JB Hi-Fi rose 0.2 per cent, to $45.61, after the electronics retailer reported a 7.7 per cent jump in annual earnings, to $544.9 million, as higher store traffic driven by the easing of COVID-19 restrictions complemented continued growth in online you go out.
The company was one of the beneficiaries of the pandemic as work-from-home mandates meant higher demand for electronics.
With easing of COVID-19 restrictions, the company was able to reopen all of its stores in the latter half of the financial year, while online sales over the year registered a 52.8 per cent jump.
This helped it increase the company’s full-year dividend payout to $3.16 a share, up from $2.87 in the prior financial year.
The company noted that the cost of doing business in Australia was higher, in-line with higher inflation in the country, while reporting higher sales in Australia and its The Good Guys brand for July.
Meanwhile, automotive classified company Carsales posted $510 million of adjusted revenue, which was a 16 per cent improvement.
The business said its fully franked final dividend would be 24.5 cents per share.
Shares of Carsales jumped 3.3 per cent, to $22.36.
Wall Street indices close up
On Friday, global equity markets rose, while US Treasury yields fell, as investors tempered their expectations of the scale of the Federal Reserve’s interest rate raising cycle as falling oil prices helped cool inflation.
Market sentiment has been buoyed by US Labor Department data last week showing a slowdown in consumer and producer prices in July after a series of interest rate hikes by the Fed.
“With inflation now backing off, all the managers who stayed in cash and didn’t believe we could move off the June lows are now being forced back into the market,” said Thomas Hayes, chairman at Great Hill Capital.
The MSCI world equity index, which tracks shares in 50 countries, was up 1.1 per cent. The pan-European STOXX 600 index gained 0.2 per cent.
US Treasury yields were down as traders weighed a likely moderation of the Fed’s monetary policy stance.
Benchmark 10-year note yields dipped to 2.8 per cent, after reaching 2.9 per cent on Thursday, the highest point since July 22.
“With inflation coming down, consumer confidence is going to be coming back, and employment is still strong. You could see a situation where the market has stabilized and the economic numbers continue to slow based on the lag effect of the Fed tightening that has already happened,” Mr Hayes added.
All three main Wall Street indices ended higher, making it the fourth straight week of gains, driven by stocks in technology, healthcare, communication services, consumer discretionary and financials.
The Dow Jones Industrial Average rose 1.3 per cent, to 33,761, while the S&P 500 gained 1.7 per cent, to 4,280, and the Nasdaq Composite added 2.1 per cent, to 13,047.
Oil prices dipped around 2 per cent on expectations that supply disruptions in the US Gulf of Mexico would be short-term, while recession fears clouded the demand outlook.
Brent crude fell slightly by 09:56am AEST, trading at $US97.80 a barrel.
Australian fast-food chain Domino’s is losing ground on the local share market, as the global brand exits the country that made pizza famous.
The company that has the Australian franchise rights to Domino’s fell 6 per cent on the ASX on Friday, to $69.31.
ASX-listed Domino’s Pizza Enterprises not only runs the brand in Australia and New Zealand, but also in Belgium, France, The Netherlands, Japan, Germany, Luxembourg, Denmark and Taiwan, with a total of more than 3,100 stores.
The fall came after news broke that the global brand is exiting Italy, seven years after it opened its first store there.
While the Italian and Australian arms are not connected, some investors appear to have taken fright from the brand’s struggles internationally.
The rise of delivery services — such as Deliveroo, Just Eat and Glovo — took away any advantage the American company thought it would have in Italy, according to a report to investors in 2021 by its Italian franchise holder ePizza SpA.
In Australia, the same pressures are hitting the takeaway sector too.
Domino’s Pizza has more than 18,500 stores worldwide in at least 90 countries. Most are run as franchises, including in Australia.
Energy gains but ASX falls
The energy sector was the leading light on the Australian share market today, after oil prices climbed back above $US100 a barrel overnight, with the benchmark Brent crude oil futures contract sitting just below that mark at 4:50pm AEST.
Woodside Energy Group led the gains on the ASX 200, with a 3.7 per cent rise.
Beach Energy (+3.1 per cent) and Viva Energy (+2.6 per cent) also had strong sessions.
Coal miners New Hope (+3.5 per cent) and Whitehaven (+2.5 per cent) also jumped on board the energy bandwagon.
However, while rising energy costs are good for producers, they are bad for most of the rest of the economy and may also put pressure on interest rates to keep rising at a fast pace.
That saw the ASX 200 and All Ordinaries indices both fall 0.5 per cent, to 7,033 and 7,289 points respectively.
Industrials — many of which are exposed to rising energy costs — were the worst-performing sector, down 2 per cent.
Consumer cyclicals — generally very exposed to rising interest rates that reduce household spending — fell 1.2 per cent.
The worst-performing companies on the ASX 200 were Lake Resources (-13.5 per cent), Novonix (-8.6 per cent), Telix Pharmaceuticals (-7.7 per cent), Arena REIT No 1 (-6.7 per cent) and Nanosonics (- 6.4 per cent).
IAG returns to profit
Profit reporting season continued in Australia today.
Major results out today included insurer IAG.
It announced its net profit is up to $347 million. That comes after it lost more than $400 million the previous financial year.
Its profitability is up despite its overall revenue actually down $548 million overall on the previous financial year to $18.34 billion.
The insurer said its growth “predominantly reflected rate increases to offset inflationary pressures in the supply chain and natural perils.”
It said its insurance margins were 7.4 per cent below expectations after it had to pay out a large amount of premiums for natural disasters.
This year has seen enormous amounts of claims linked to the east coast floods and storms. IAG itself was hit by more than $1 billion.
IAG gained 1.1 per cent, to $4.66.
It is paying a dividend of 5 cents per share, down from last year’s 13-cent payout.
Investors not buying the inflation ‘Kool Aid’
The ASX traded down after Wall Street had mixed results overnight.
In the US, the Dow Jones closed flat, the S&P500 ended down 0.1 per cent, and the tech-heavy Nasdaq was off 0.6 per cent.
Wall Street surged the previous day when US markets rose after the world’s biggest economy released its latest inflation data.
The data showed price hikes were starting to ease, which might soften concerns about another big rate hike of up to 0.75 per cent next month.
However, San Francisco Fed president Mary Daly said it was too early to “declare victory” on inflation, despite the better figures.
Ms Daly also said a 0.5 per cent rate hike in September was currently her “baseline”, and jobs and worker data that would be out soon also needed to be taken into consideration.
Oil up as people switch from costly gas
US 10-year Treasury yields have risen slightly, in an indication that markets, too, are still betting on rate hikes.
City Index analyst Tony Sycamore said it looked like investors will still betting on the rate US hike to be as high as 0.75 per cent.
“The interest rate market is clearly not drinking the same post-inflation Kool Aid that the equity market has slugged on,” he said.
“Financial markets initially reacted positively to [US inflation] data that showed inflation in the US is moderating, but gains [were] then whittled away on concerns the market may have overreacted,” ANZ also noted.
Meanwhile, oil is up again.
“Oil prices continue to increase [as] hopes of stronger demand strengthened,” ANZ noted.
“The International Energy Agency [IEA] lifted its consumption estimate by 380 [thousand barrels per day]saying soaring gas prices amid strong demand for electricity is driving utilities to switch to oil.”
The US dollar dropped back to its post-CPI lows overnight, before paring back some losses.
“[The Australian dollar against the US dollar] briefly edged up towards 0.7150, thanks to a weaker $US and higher oil prices,” ANZ noted.
“Risks to [the Australian dollar] are still to the downside in our view.
“While market expectations for rate hikes [by the Reserve Bank of Australia] have come off in recent months, market pricing still shows a peak in the cash rate well above 3 per cent.”
The Australian dollar ended the day at 71.18 US cents by 5pm AEST.
Australian shares are set to falter as global markets ponder whether the worst rate hikes are over.
Wall Street had mixed results overnight, with the Dow Jones closing flat, the S&P500 down 0.1 per cent, and the tech-heavy Nasdaq off 0.6 per cent.
Wall Street surged the previous day when US markets rose after the world’s biggest economy released its latest inflation data.
The data showed price hikes were starting to ease, which might soften concerns about another big rate hike of up to 0.75 per cent next month.
However, San Francisco Fed president Mary Daly said it was too early to “declare victory” on inflation despite the better figures.
Ms Daly also said a 0.5 per cent rate hike in September was currently her “baseline”, and jobs and worker data that would be out soon also needed to be taken into consideration.
With Wall Street now retracting its flush of optimism, ASX 200 futures were also down in early-morning indications.
They were down 1.5 per cent by 7am AEST.
Oil up as people switch from costly gas
US 10-year Treasury yields have risen slightly in an indication that markets too are still betting on rate hikes.
“Financial markets initially reacted positively to [US inflation] data that showed inflation in the US is moderating, but gains then whittled away on concerns the market may have overreacted,” ANZ noted.
“At close, the Euro Stoxx 50 had gained 0.2 per cent, the FTSE 100 dropped 0.5 per cent, while the S&P 500 and the Dow Jones were largely unchanged.
“The yield on the US 10y note jumped 11bp higher to 2.89 per cent.”
Meanwhile, oil is up again.
“Oil prices continue to increase (as) hopes of stronger demand strengthened,” ANZ noted.
“The International Energy Agency [IEA] lifted its consumption estimate by 380kb/d, saying soaring gas prices amid strong demand for electricity is driving utilities to switch to oil.”
The greenback dropped back to its post-CPI lows overnight, before paring some losses.
“AUD/USD briefly edged up towards 0.7150 thanks to a weaker USD and higher oil prices,” ANZ noted.
“Risks to AUD are still to the downside in our view.
“While market expectations for rate hikes (by the Reserve Bank of Australia) have come off in recent months, market pricing still shows a peak in the cash rate well above 3 per cent.”
When Brett Clements got his first job at 15, he dreamed that, if he worked hard, he would be able to enjoy the fruits of his labor and retire at 40, but it wasn’t to be.
Key points:
The Superannuation Association of Australia estimates a single person needs $545,000 to retire comfortably
One million people who withdrew some of their super early during the pandemic have been left with less than $1,000 in their account
Share market volatility has also had an impact on super balances
A modest superannuation balance and the rising cost of living mean the 60-year-old Perth-based cleaner expects to be working for at least another 10 years.
“I have about $150,000 in superannuation, and I’ll end up with $10,000 left out of my superannuation after the house is paid for, which isn’t a lot to live on after 45 years of working,” he told ABC’s 7.30.
“[I’m] definitely behind the eight ball … because the wages aren’t good. So, therefore, your [amount] is not that great going into super.”
Another decade of labor will be painfully hard for Mr Clements, who still suffers physically and financially from breaking his back when he owned his own cleaning business 20 years ago.
“We tried to keep that business going. In the end, we just had to fold it,” he said.
“I’ve suffered with this ever since.”
Mr Clements’ 75-year-old wife works alongside him as a cleaner and can’t afford to retire either.
Brett Clements expects he will be working for at least another 10 years.(ABC News: Phil Hemingway)
“She’ll tell you that I’ve become more and more depressed,” he said.
“We buy mainly home-branded stuff but … an $80 shop is now $130.”
What’s making Mr Clements even more uneasy is that his superannuation balance is fluctuating daily because of the global economic uncertainty.
“I have a balanced superannuation, so I’m not a big risk-taker,” Mr Clements said.
“COVID hit, the war in Ukraine has hit. Now, suddenly, everything’s volatile.”
According to consultancy firm SuperRatings, only three superannuation funds have reported that they made money for their members with balanced investments during the past financial year.
SuperRatings’ top 10 balanced super options over 12 months:
Rank
Option name
1-year returns (%)
1
Hostplus – Balanced
1.6
two
Qantas Super Gateway—Growth
0.6
3
Christian Super — MyEthicalSuper
0.5
4
Legalsuper — MySuper Balanced
-1.0
5
Australian Retirement Trust — Super Savings – Balanced
-1.0
6
Energy Super—Balanced
-1.2
7
Aust Catholic Super and Ret—Balanced
-1.2
8
CareSuper—Balanced
-1.7
9
HESTA—Balanced Growth
-1.8
10
Telstra Super Corp Plus — Balanced
-1.9
Glenn McCrea says Australians shouldn’t be focused on short-term share market volatility when it comes to their super.(Supplied)
However, the Association of Superannuation Funds Australia’s deputy chief executive, Glenn McCrea, is urging older Australians not to panic about share market volatility.
“The reality is [the previous] financial year, we saw returns of 20 per cent. Este [past] year, it has fallen slightly, on average about 3 per cent,” he said.
“Call your fund. Understand where your fund invests. Understand your balance and how your balance has changed over time.
“I do encourage people to look at returns over 10 years, rather than follow what happens day to day.”
The downturn in superannuation amounts comes as the government and opposition clash over the level of detail that superannuation funds provide to their members about political donations, marketing and sponsorship expenses.
super balances at retirement
Estimates vary on how many Australians need to retire.
Mr McCrea said that, on the association’s calculations, a single person would need $545,000 and a couple $640,000 in retirement to live comfortably.
“[It] basically means you can afford to go to a dentist, you can catch up with friends and have that cup of coffee, you can fix the washing machine or car,” he said.
“We estimate that, by 2050, 50 per cent of Australians will get to that dignity in retirement.”
Despite wanting to be self-sufficient, Mr Clements knows his superannuation won’t be enough to sustain his retirement.
“I’ll have to go, cap in hand, to the government and try [to] draw on a pension,” he said.
“Pride gets in the way sometimes.”
Young Australians also worried
It’s not just those hoping to retire soon who are feeling nervous about their superannuation and their future.
Hairdresser Michaela Marshall-Lawrence, 27, was forced to withdraw $5,000 from her superannuation at the start of the pandemic to keep her salon afloat.
She’d just opened the business, and faced the brunt of lockdowns amid a drop in bookings.
Michaela Marshall-Lawrence had only just opened her business when COVID-19 hit.(ABC News: Edward Gill)
“I wasn’t eligible for any government support, in any way, shape or form,” she said.
“I had already exhausted 95 per cent of my savings on purchasing the salon.
“[The $5,000 super withdrawal] it was enough that it paid for another month’s worth of rent, and I could pay my staff and I could afford to live.”
Under the former Coalition government’s scheme, up to $20,000 could be withdrawn from a person’s super during the pandemic if they were experiencing hardship.
However, withdrawing the money early meant missing out on potentially tens of thousands of dollars of compound earnings across future years, something that concerns Ms Marshall-Lawrence.
Michaela Marshall-Lawrence is making extra super contributions to try to grow her balance faster.(ABC News: Edward Gill)
“I’m now paying myself 22 per cent super,” she said.
“I know so many people, they’re like, ‘Oh, it’s just super. I can’t access it for another 50-60 years anyway, so what’s the point?’
“And it’s like, ‘Well, there is a big point, you know’.”
Data exclusively provided to ABC’s 7.30 by the Association of Superannuation Funds Australia shows that, out of the 3 million people who accessed their super early, 1 million were left with less than $1,000 in their super account, while 163,000 people were left with no super at there.
Mr McCrea said those who took out money early were mostly single parents, women and those on low incomes, and 44 per cent of applicants were aged under 35.
“There’s no doubt younger people were the main people to take money out through early release,” he said.
“What we do know is a younger person who took the full $20,000 out, will be $43,000 worse off in retirement, so that’s for a 30-year-old,” he said.
Council on the Aging chief executive Ian Yates said those who had withdrawn early would find it tougher to fund their own retirement.
Council on the Aging Australia’s Ian Yates predicts early withdrawals may see higher pension costs in future.(ABC News: Marco Catalano)
“The impact of that withdrawal is that there’ll be higher pension costs into future years,” he said.
Shadow Minister for Financial Services Stuart Robert maintains the former Coalition government policy was a necessary one at a time of crisis.
“This was a one-in-100-year pandemic. This is a not normal state of affairs,” he said.
“Australians are pretty canny and Australians are able to make decisions themselves.
“The requirement, and the responsibility, was with individual Australians because, remember, it’s their money.”
Fund spending in the spotlight
How superannuation funds spend their members’ money is currently under scrutiny before Federal Parliament.
Mr Robert said the Labor Government was trying to wind back the Coalition’s policy to force funds to itemise disclosure of political donations, marketing, and sponsorship expenses.
Shadow Minister for Financial Services Stuart Robert says members should be able to see how super funds are spending their money.(ABC News: Matt Roberts)
“We believe them [super funds] should be transparent. All members should be able to see how every dollar of their money has been spent,” he said.
“The transparency and integrity of superannuation of members’ money is being watered down so the Labor government can try and hide what super funds are spending their money on when it comes to political donations, when it comes to football sponsorships.”
Mr Robert has written to crossbenchers urging them to support itemized disclosure and disallow Labor’s proposal for less detail, which has been drawn up as a draft regulation.
The government said there would still be a requirement for super funds to disclose payments to industrial bodies, including unions and employer associations, but it would be an aggregate figure and not itemised.
Watch this story on 7:30 tonight on ABC TV and ABC iview.
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.
This would be the sharpest rise in consumer prices since 1980, due mostly to the surge in energy prices following Russia’s invasion of Ukraine.
With that in mind, the BoE’s monetary policy committee voted 8-1 for the UK’s benchmark rate to increase to 1.75 per cent (up from 1.25 per cent), its highest level since late-2008.
It also warned that Britain was facing a recession with a peak-to-trough fall in output of 2.1 per cent, similar to a slump in the 1990s but far less than the hit from COVID-19 and the downturn caused by the 2008-09 global financial crisis.
The UK economy would begin to shrink in the final quarter of 2022 and contract throughout all of 2023, making it the longest recession since after the global financial crisis.
That would leave households experiencing a fall in their disposable income for two years in a row, the biggest squeeze since these records began in 1964.
British consumer price inflation was already at a 40-year high of 9.4 per cent in June, already more than four times the BoE’s target of 2 per cent.
This has triggered industrial action and puts pressure on whoever succeeds Boris Johnson as Britain’s next prime minister to come up with further support.
“Seeing as the BoE have hiked interest rates six times since December, and they still feel that inflation will continue to rise, it is almost as if they are admitting their monetary tightening can not control the CPI [consumer price index],” said David Madden, market analyst at Equity Capital.
“It begs the question, why hike at all if you feel that factors beyond your control – food prices, energy costs and supply chain issues – are the main culprits for rising inflation.”
Oil sinks to pre-Ukraine war levels
The fall in oil prices to its lowest level since February will come as a relief to large consumer nations including Australia and the United States, which could expect to see petroleum prices fall even further.
Oil had surged to well over $US120 a barrel earlier this year, before falling back towards $US93 overnight.
A sudden rebound in demand from the darkest days of the COVID-19 pandemic coincided with supply disruptions stemming from sanctions on major producer Russia over its invasion of Ukraine.
The demand outlook remains clouded by increasing worries about an economic slump in the United States and Europe, debt distress in emerging market economies, and a strict zero COVID-19 policy in China, the world’s largest oil importer.
“A break below $US90 is now a very real possibility, which is quite remarkable given how tight the market remains and how little scope there is to highlight that,” said Craig Erlam, senior market analyst at Oanda in London.
“But recession talk is getting louder and should it become reality, it will likely address some of the imbalance.”
An OPEC+ agreement on Wednesday to raise its output target by 100,000 barrels per day in September, equivalent to just 0.1 per cent of global demand, was viewed by some analysts as bearish for the market.
Australian shares are expected to start the day higher as US technology stocks rebounded overnight, lifting the Nasdaq to a three-month high.
Key points:
Oil prices have jumped 25pc since the year began, despite today’s fall
The Australian dollar has dropped 9pc (since its high point of 76.6 US cents in April)
US companies have, generally, been reporting higher-than-expected earnings
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 $US97.10 a barrel.
It comes after the OPEC+ group of oil-producing nations, including Saudi Arabia and Russia, announced that it would increase its supply by a mere 100,000 barrels per day.
On top of that, a new report from the Energy Information Administration showed an unexpected surge in US crude and gasoline stocks.
“Oil is still up 25 per cent from the beginning of the year,” said Oliver Pursche, senior vice president at Wealthspire Advisors in New York
“This recent drop is a combined result of that and a reflection that there is going to be an economic slowdown. The market is trying to find equilibrium.”
Stronger-than-expected earnings
Investor sentiment was also boosted by strong earnings reports from PayPal, CVS Health Corp and other companies.
Financial results — which the market’s low expectations — have helped US markets rebound from losses caused by worries about decades-high inflation, rising interest rates and shrinking economic output.
Apple and Amazon rallied almost 4 per cent, while Facebook-owner Meta Platforms jumped 5.4 per cent.
PayPal soared almost 10 per cent after it raised its annual profit guidance and said activist investor Elliott Management had a more-than-$US2-billion stake in the financial technology firm.
CVS Health gained 6.3 per cent after the largest US pharmacy chain raised its annual profit forecast when it posted strong quarterly results.
“We’re going through second quarter earnings and, by and large, from the tech complex to consumer discretionary and industrials, we’re seeing a lot of better-than-feared prints, and that’s just good enough right now,” said Sahak Manuelian, managing director of trading at Wedbush Securities in Los Angeles.
US services sector rebounds
The turnaround comes as the latest economic data showed the US services industry unexpectedly rebounded in July as supply bottlenecks and price pressures eased.
The Institute for Supply Management said its non-manufacturing PMI (purchasing managers index) rebounded to a reading of 56.7 points last month (from 55.3 in June). This increase ended three straight monthly declines.
Economists polled by Reuters had forecast the non-manufacturing PMI decreasing to 53.5. A reading above 50 indicates expansion in the services sector, which accounts for more than two-thirds of US economic activity.
That emboldened enough investors to bet that the US economy was not in recession, despite the nation’s output (or GDP) slumping for six months in a row.
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.
The Nasdaq declined 0.2 per cent to 12,349, while the Dow Jones index fell 1.2 per cent to 32,396.
On the economic front, a report from the Labor Department showed job openings in the United States dropped by 5.4 per cent in June, a sign that the job market is weakening amid softening demand.
Since the US Federal Reserve raised interest rates by 0.75 percentage points in July, investors have been speculating about whether the central bank’s largest hikes are already behind it.
“The market has to get really comfortable that they have fully baked in all the Fed’s rate hikes, and I think that remains an open question,” said Rob Haworth, senior investment strategist at US Bank Wealth Management in Seattle.
“The challenges and supply constraints aren’t necessarily done. They aren’t done and gone yet.”
Oil prices slipped ahead of the OPEC+ meeting of oil producers expected this week, the outcome of which could mean a boost to global crude supply, while lingering recession fears helped cap those gains.
Brent crude futures fell 0.4 per cent, to $US99.63 a barrel.
Spot gold dropped 0.7 per cent, to $1,760.24 an ounce.
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.
Key points:
The ASX 200 has dropped 6.1pc since the year began
On Wall Street, the S&P 500 has lost 14pc of its value since January 1
The RBA has lifted interest rates by 1.25pc in the past three months
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.
All three major US indexes were modestly lower on the first day of August, coming on the heels of the S&P 500’s and the Nasdaq’s biggest monthly percentage gains since 2020.
“There are still a lot of questions about whether we are really out of the woods, economically, and we probably aren’t,” said Tom Martin, a senior portfolio manager at GLOBALT Investments in Atlanta, Georgia.
“We’re not even close on the [economic] effects of the [Federal Reserve] raising interest rates.”
The S&P 500 declined 0.3 per cent, to end the session at 4,119 points.
The Nasdaq slipped 0.2 per cent, to 12,369, while the Dow Jones index fell 0.1 per cent, to 32,799.
Energy stocks pulled European markets into the red as fears of weakening demand and economic contraction on the heels of disappointing data from the euro zone and China.
The pan-European STOXX 600 index lost 0.2 per cent overnight.
Crude oil prices headed lower as traders braced for this week’s meeting of OPEC and other oil producers concerning world crude supply.
Brent crude fell 3.9 per cent, to $US100.03 per barrel.
Gold prices edged higher after the US dollar softened, as investors looked to economic data for clues regarding the pace of interest rate hikes from the US Federal Reserve.
Spot gold added 0.2 per cent, to $US1,768.73 an ounce.
