Source : the age
The Australian sharemarket drifted lower on Wednesday following losses on Wall Street and another rise in oil prices, which are closing in on the $US100-a-barrel mark.
Having opened higher, the S&P/ASX 200 tipped south and finished down 9.40 points, or 0.1 per cent, at 8911.40, with seven of its 11 sectors in the red, while energy and mining stocks advanced. The ASX slumped 1 per cent to a six-week low on Tuesday amid mounting bets on more interest rate rises to battle oil-price-fuelled inflation. The Australian dollar rose 0.3 per cent to US72.36¢.
Brent is up more than 60 per cent this year, and traded at about $US99 a barrel at market close after renewed fighting across the Middle East, while West Texas Intermediate traded near $US94. Refined products such as diesel have rallied even harder as the Middle East conflict has broadened to the Red Sea near Saudi Arabia, alongside the Russia-Ukraine war.
The US struck Iranian tankers near the Kharg Island export hub and in the Gulf of Oman, stoking fears of deeper disruptions through the Strait of Hormuz.
The rising fuel costs have worsened worries about the high inflation weighing on consumers and companies. The Reserve Bank is under increasing pressure to resume raising rates as soon as this month due to the strong inflation figures and economic growth. Money markets are wagering about a 70 per cent chance of a hike in three weeks’ time and fully pricing one in for the November meeting.
“With geopolitical tensions and oil prices on the rise, the markets may find it difficult to focus on much beyond the inflation discussion,” said Chris Larkin at E*Trade from Morgan Stanley.
Energy stocks advanced in the oil rally, with Woodside Energy and Santos up 2.6 per cent and 1.3 per cent, respectively. Fuel refiner Ampol rose 1.4 per cent.
Miners also had a strong morning, with the iron ore and copper heavyweights BHP and Rio Tinto climbing 3.3 per cent and 1.9 per cent. The price of copper has been on a tear since the start of last year and set a new intraday record above $US14,600 per tonne on the London Metal Exchange earlier this month, though it eased a bit on Wednesday. Fortescue Metals gained 0.5 per cent.
Gold producers, however, limited the mining sector’s gains. Northern Star Resources slumped 2 per cent and Evolution Mining fell 1.6 per cent as both stocks went ex-dividend, meaning investors buying the stock now won’t get the rights to their latest shareholder payouts.
The same applied to biotech giant CSL, which fell 2.1 per cent as it traded without the rights to its latest dividend for the first time, pulling down the healthcare sector.
The big four banks were also down. Commonwealth Bank fell 2.2 per cent, National Australia Bank shed 1.5 per cent, Westpac dropped 0.6 per cent and ANZ Bank edged down 0.4 per cent.
Shipbuilder Austal jumped 7.1 per cent after receiving a bid from a second company for its US assets, with the latest suitor offering as much as $US1.35 billion ($1.87 billion), topping last month’s offer from a South Korean defence firm. Investment firm Wildcat Infrastructure’s offer values Austal’s US business, including shipbuilding assets, at between $US1.25 billion and $US1.35 billion. Any deal would likely require government approval both here and in the US.
On Wall Street overnight, US stocks retreated as they resumed trading after a three-day weekend, as the latest fighting in the war pushed oil prices higher. The S&P 500 sank 0.6 per cent. The Dow Jones Industrial Average dropped 1.2 per cent, and the Nasdaq composite dipped 0.3 per cent.
On Thursday, the US government will release its August report for inflation at the wholesale level, which economists expect will show an acceleration to 5.4 per cent from 4.7 per cent in July.
The more closely watched report on inflation that US consumers are feeling will arrive on Friday. That update will show how much more people are paying for groceries, clothes and other living costs than a year earlier, and economists expect it eased a bit to 3.3 per cent from July’s 3.4 per cent inflation rate. That, though, remains well above the 2 per cent target that the Federal Reserve has set as its goal.
This week’s updates on inflation will be the last before the Fed meets next week to decide whether to cut, raise or hold interest rates steady. The traditional move for the Fed when inflation is high is to raise its main interest rate. That in turn would filter out into the rest of the bond market, make it more expensive for companies and people to borrow, slow the overall economy, undercut prices for investments and hopefully rein in inflation.
But President Donald Trump has been lobbying for lower interest rates instead, which could give the economy – and inflation – an extra kick. The Fed’s new chairman, Kevin Warsh, has meanwhile said he wants to give financial markets fewer clues about what the Fed plans to do with interest rates in the short term.
That all has traders betting on a nearly 60 per cent probability the Fed will raise its federal funds rate at the conclusion of its next meeting on September 16, according to data from CME Group.
In the bond market, the yield on the 10-year US Treasury rose to 4.79 per cent from 4.78 per cent and is near its highest level since the autumn of 2023.
Higher Treasury yields put more pressure on companies to grow their profits in order to lift their stock prices.
On Wall Street, Boston Scientific fell 5.9 per cent after saying that a network outage earlier this summer caused by a cybersecurity incident means it’s unlikely to meet forecasts for sales and profit for the third quarter and for the full year of 2026.
Shares of Novartis that trade in the United States tumbled 13.9 per cent after the Swiss pharmaceutical company gave a discouraging update on a study of a therapy for people living with myotonic dystrophy type 1, a neuromuscular disease.
In other international markets, Japan’s Nikkei 225 sank 1.7 per cent under the weight of losses for major exporters, which were hurt by the continued rise for the Japanese yen against the US dollar.
A stronger yen erodes the value of sales made in US dollars when Toyota Motor, Panasonic Holdings and other exporters translate them back into the Japanese currency. The Bank of Japan is also scheduled to meet next week on interest rates, and speculation is climbing that it could raise interest rates, which could further strengthen the yen.
In China, indexes fell 0.4 per cent in Hong Kong and rose 0.2 per cent in Shanghai after the world’s second-largest economy said its exports jumped 25 per cent year-on-year in August, driven by strong demand for autos and high-tech items.
with AP, Bloomberg
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