Australian shares were set to open lower following a late slump on Wall Street and a mixed night on commodity markets after the Federal Reserve warned interest rates will rise for some time.
ASX futures declined 37 points or 0.52 per cent to 7111.
Oil fell 3 per cent after OPEC cut its global demand forecast. Iron ore and gold added to last week’s gains. Base metals were mixed. The dollar pushed back above 67 US cents.
US stocks unwound some of last week’s fierce rally after Fed officials insisted interest rates would continue to increase, albeit at a slower pace. The major indices were ahead mid-session before selling off into the close. The market was coming off its best week since June.
The S&P 500 fell 36 points or 0.89 per cent. The Dow Jones Industrial Average gave up 211 points or 0.63 per cent. The Nasdaq Composite shed 127 points or 1.12 per cent.
The market opened in the red after Fed Governor Christopher Waller warned markets got ahead of themselves last week after US inflation showed signs of cooling. Waller said the central bank may now slow the pace of rate hikes, but was likely to keep raising for some time.
“We’re at a point we can start thinking maybe of going to a slower pace,” Waller told a Sydney conference. But markets should “quit paying attention to the pace and start paying attention to where the endpoint is going to be. Until we get inflation down, that endpoint is still a ways out there.”
The market mood briefly improved when Vice Chair Lael Brainard said “it will probably be appropriate soon to move to a slower pace of increases.” However, she also emphasised there was “additional work to do” to bring inflation lower.
“It’s really going to be an exercise on watching the data carefully and trying to assess how much restraint there is and how much additional restraint is going to be necessary, and sustained for how long, and those are the kinds of judgments that lie ahead for us,” she said.
Rate-sensitive sectors led the selling. Real estate fell 2.65 per cent. Financials shed 1.54 per cent. The consumer discretionary sector dropped 1.71 per cent after Amazon announced plans to cut around 10,000 jobs.
Healthcare was the pick of the sectors with a skinny rise of 0.03 per cent. Materials was next best with a loss of 0.21 per cent.
The S&P 500 was coming off its best week in five months. The US benchmark put on 5.9 per cent last week after the Consumer Price Index slowed more than expected.
The week ahead is expected to be dominated by economic data, earnings from retailers and a string of appearances by Fed officials. Reports on wholesale inflation, retail sales and housing are due this week, as well as trading updates from the likes of Walmart and Home Depot.
The market appears to have slipped into consolidation mode after last week’s feast. Big meals need time to digest.
The S&P/ASX 200 faded to a loss of less than 0.2 per cent yesterday as the global rally lost momentum. More downdrift appears likely today, unless the session’s economic data springs a major surprise.
Resource stocks provided much of yesterday’s upside, and held up reasonably well in a falling market in the US overnight. Index heavyweight BHP moved higher in US trade (more below). Gold miners and healthcare providers look to be other possible havens this session.
The dollar continued to build on last week’s recovery, rising 0.11 per cent overnight to 67.02 US cents.
The minutes from this month’s Reserve Bank policy meeting, released at 11.30 am AEDT, will shed more light on the interest rate trajectory from here. While any hint of a pause would trigger jubilation, central banks thrive on ambiguity. Tone is often more significant than what is actually said.
Weekly consumer confidence figures are also due this morning.
Given the current focus on China, the October data dump from our biggest trading partner at 1 pm AEDT will also have an impact. Growth in factory activity is expected to moderate, as are retail sales. Unemployment and asset investment are expected to match September rates.
There are AGMs today for shareholders in AGL, Allkem and Lifestyle Communities.
Commonwealth Bank gives a quarterly trading update. NAB trades ex-dividend. Incitec Pivot and United Malt release full-year earnings.
Chinese moves to water down Covid restrictions and support the nation’s embattled property market kept bulk metals on the rise. Authorities announced 20 measures to improve Covid policy and 16 measures to support the property market, a sign the government had recognised the negative impact of recent policies on the economy.
“The moves will clearly provide some support to China’s economy, though have to be factored in against the rising COVID case numbers being seen across the country,” Robert Carnell, head of research at ING Asia-Pacific, said.
Iron ore touched its highest level in more than a month. The most-traded January ore contract on the Dalian Commodity Exchange hit 735.50 yuan before closing 1.9 per cent higher at 710.50 yuan (US$100.85) a tonne. Singapore futures were up more than 5 per cent at their peak.
Copper backed off a five-month high, but several other industrial metals posted solid gains. Benchmark copper on the London Metal Exchange declined 0.9 per cent to US$8,415 a tonne after trading as high as US$8,600.
Nickel rallied 5.3 per cent, zinc 3 per cent, lead 1.1 per cent and tin 1.9 per cent. Aluminium lost 1.2 per cent.
BHP‘s US-traded depositary receipts gained 0.61 per cent. Earlier, the miner’s UK listing put on 2.25 per cent. Rio Tinto gave up 0.68 per cent in the US after inching up 0.17 per cent in the UK.
A cautious outlook and downgraded demand forecast from the Organization of the Petroleum Exporting Countries and allies (OPEC+) pulled oil sharply lower. The cartel cut its full-year demand forecast by 100,000 barrels a day to 2.5 million barrels a day, citing China’s Covid policy. The organisation said energy markets faced “considerable uncertainties”.
Brent crude settled US$2.85 or 3 per cent weaker at US$93.14 a barrel. The US benchmark dropped 3.5 per cent to US$85.87.
Gold built on last week’s 5 per cent rally, closing at its highest since mid-August. The yellow metal has attracted haven flows during the latest burst of volatility in cryptocurrencies. Bitcoin traded briefly below US$16,000 a coin overnight.
Gold for December delivery settled US$7.50 or 0.4 per cent ahead at US$1,776.90 an ounce. The NYSE Arca Gold Bugs Index eked out a gain of 0.11 per cent.