Source : the age
The Australian sharemarket finished lower on Thursday after speculation the Federal Reserve would hike interest rates this year to battle inflation in the world’s largest economy weighed on prices for metals such as iron ore and copper, sending down mining heavyweights.
Energy stocks fell as oil prices continued their slump after President Donald Trump signed an interim deal to end the war with Iran and reopen the Strait of Hormuz. Defensive sectors such as the supermarkets and the nation’s biggest health stock CSL advanced after losses earlier this week.
The S&P/ASX 200 finished down 55.2 points, or 0.6 per cent, at 8911.10, with seven of its 11 industry sectors in the red. The bourse rose 0.5 per cent on Wednesday. The Australian dollar edged up 0.3 per cent to US70.36¢.
Mining stocks declined, with BHP retreating 0.8 per cent from its record price on Wednesday, while Rio Tinto and Fortescue Metals fell 2 per cent and 1.7 per cent, respectively. Gold miners also declined, even as bullion prices erased their overnight drop, which had been sparked by fears of rate hikes making investing in non-interest bearing assets such as gold less attractive. Northern Star was down 1.6 per cent and Evolution Mining dropped 1.9 per cent.
Energy stocks were also lower again, following the post-war trajectory of oil prices. Brent sank below $US78 a barrel, while West Texas Intermediate was near $US75. Trump said he had signed the deal, which envisions a rapid reopening of the critical oil transport waterway, the Strait of Hormuz. Oil and gas giant Woodside lost 1.2 per cent, while rival Santos shed 0.4 per cent and refiner Amoil fell 0.6 per cent. Coal miners, who had benefited from demand for the fossil fuel in the oil crunch, also declined, with Yancoal finishing down 0.9 per cent and Whitehaven Coal losing 3 per cent.
The technology sector, sensitive to interest rate rises in the face of its massive borrowings to develop AI, also finished in the red. Software makers WiseTech Global and Xero were down 3.4 per cent and 3.9 per cent, while Technology One fell 1.2 per cent and NextDC dropped 0.3 per cent.
The big four banks were mixed. CBA, the nation’s biggest bank, slipped 0.9 per cent, Westpac shed 1.1 per cent and National Australia Bank retreated by 0.9 per cent, but ANZ Bank bucked the trend and added 0.3 per cent.
Defensive stocks such as supermarket chain Coles (up 1.1 per cent), dairy company A2 Milk (up 1.7 per cent) and biotech giant CSL (up 1.2 per cent) rebounded after struggling in the initial market rally after the peace deal was announced.
On Wall Street overnight, US stocks swung from a small gain to close sharply lower as the Fed kept its main interest rate on hold but released projections showing that nine of its 18 policymakers foresee at least one increase was coming this year, in its first meeting under new chairman Kevin Warsh. The Dow Jones went from a gain of 280 points in the morning to a drop of 507 points, or 1 per cent, while the Nasdaq composite sank 1.3 per cent.
“Half the committee is expecting rate hikes this year, which is a real shot across the bow at the market,” said Bob Michele, chief investment officer and global head of fixed income at JPMorgan Asset Management. “I think they’re getting ready for rate hikes.”
The new Fed chair began his tenure as chairman of the US central bank with a solemn vow to curb inflation and a clear sign that he plans to swiftly revamp how the Fed does its job. But missing was any clear guidance from him on what it means for interest rates.
Wall Street reacted uneasily to Fed officials’ latest set of projections, though Warsh cautioned he “didn’t hear tonnes of conviction” behind them.
“The Fed’s hawkish hold has recalibrated expectations across global markets. By keeping further rate hikes on the table and adjusting inflation forecasts upward, the central bank has effectively pulled the rug out from under the near-term growth narrative,” said IG International market analyst Fabien Yip.
Traders upped their bets for at least one increase to the federal funds rate this year and see an 84 per cent probability of it, up from 59.5 per cent a day earlier, according to data from CME Group.
High yields in bond markets worldwide caused by worries about inflation have already been threatening to slow economies and undercut prices for all kinds of investments.
On the Nasdaq market, SpaceX erased an early gain and fell 4.9 per cent for its first loss since its ballyhooed debut at the end of last week.
Drops of 3.8 per cent for Microsoft, 3.5 per cent for Amazon and 1.3 per cent for Nvidia were three of the heaviest weights on the S&P 500.
They helped overshadow a jump of 14.8 per cent for La-Z-Boy, which reported stronger profit and revenue for the latest quarter than analysts expected.
A report released on Wednesday said retailers across the US saw their revenue grow at a faster pace in May than economists expected, offering hope that solid spending by consumers can support the economy. But high inflation has also made US shoppers feel more discouraged about their finances.
In other international markets, indexes were mixed across Europe.
With AP, Reuters, Bloomberg
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