Source : THE AGE NEWS
By Stan Choe
The Australian share market is set to drop on Thursday morning following meagre gains on Wall Street overnight, with futures pointing to a 0.37 per cent fall – or 31 points – at the open.
The drop is set to come after the ASX posted a strong performance on Wednesday, when it gained 0.8 per cent after positive inflation data left investors hopeful for a sooner-than-expected interest rate cuts.
The ASX posted strong results on Wednesday.Credit: Louise Kennerley
In the US overnight, Wall Street held firmer, a day after strong reports on the economy hurt stocks by stirring up worries that inflation and interest rates may remain higher than expected.
The S&P 500 rose 0.2 per cent to recover a bit of its 1.1 per cent slump from the day before. The Dow Jones Industrial Average added 106 points, or 0.3 per cent, and the Nasdaq composite edged down by 0.1 per cent.
The Australian dollar had weakened slightly on Thursday morning, fetching 62 US cents.
In the bond market, which has been the bigger focus for Wall Street recently, the moves were also more modest following the last month’s charge higher for yields. Higher yields hurt stocks by making it more expensive for companies and households to borrow and by pulling some investors toward bonds and away from stocks.
The increased calm returned to the market after reports on the economy on Wednesday weren’t as strong as Tuesday’s reports. That can counter-intuitively help Wall Street because it raises hopes that the Federal Reserve may keep cutting short-term interest rates. Wall Street loves lower rates, which can speed up the economy and boost prices for investments.
Federal Reserve governor Christopher Waller said in a speech on Wednesday he still expects the central bank to deliver more easing of rates in 2025, pushing back against nascent speculation it may already be done after cutting three times since September.
Waller said he didn’t expect tariffs that were possibly coming under President-elect Donald Trump to have a “significant or persistent effect” on inflation. And even though inflation has shown stubbornness recently, Waller still sees it trending downward over the long term.
“If the outlook evolves as I have described here, I will support continuing to cut our policy rate in 2025,” he said. “The pace of those cuts will depend on how much progress we make on inflation, while keeping the labour market from weakening.”
Federal Reserve governor Christopher Waller expects the central bank to deliver more rate relief.Credit: Bloomberg
The yield on the two-year Treasury, which tends to closely track expectations for Fed action, fell immediately after Waller’s speech and the release of a couple of economic reports. It eased to 4.27 per cent from 4.29 per cent late on Tuesday.
One of the reports suggested US employers outside the government slowed their hiring in December by more than economists expected. That could offer a hint of what Friday’s more comprehensive jobs report from the Labour Department will show.
That update will likely be the main event for Wall Street this week, particularly after the stock market’s closure on Thursday in observance of a national day of mourning for former president Jimmy Carter. The hope is that the jobs report will show enough strength to keep worries of a recession stifled but not so much that it keeps the Fed from cutting rates.
On the winning end of Wall Street, eBay jumped 9.9 per cent for the biggest gain in the S&P 500. The company is beginning a collaboration with Meta Platforms, where a pilot of select eBay listings will appear on Facebook Marketplace in the US, Germany and France.
Cal-Maine Foods climbed 1 per cent after the egg producer reported stronger profit for the latest quarter than analysts expected. Chief executive Sherman Miller said the company sold more eggs thanks in part to strong demand from the seasonal boost it gets before Thanksgiving.
All told, the S&P 500 rose 9.22 points to 5918.25. The Dow Jones Industrial Average gained 106.84 to 42,635.20, and the Nasdaq composite slipped 10.80 to 19,478.88.
In stock markets abroad, indexes were mixed across Europe and Asia. South Korea’s Kospi climbed 1.2 per cent, but Hong Kong’s Hang Seng fell 0.9 per cent.
AP
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