Source : the age
The Australian sharemarket has fallen across the board in early trade after stocks fell on Wall Street as the price of crude oil rose back above $US100 a barrel amid further escalation in the US war with Iran, and as US President Donald Trump said prices will remain elevated until after the midterm elections in November.
The S&P/ASX 200 was down 117.2 points, or 1.3 per cent, to 8794.2, with all 11 sectors in negative territory.
Mining stocks fell sharply with iron ore heavyweights weakening as the price of the key steel-making ingredient dropped below $US100 per tonne. BHP fell 2.1 per cent, Fortescue lost 2.3 per cent and Rio Tinto slumped 2.5 per cent in early trade. Losses for gold stocks were more muted, with the price of the precious metal steady at about $US4400 an ounce, as traders awaited US inflation data due later this week for clues to whether the Federal Reserve will hike interest rates. Northern Star lost 0.6 per cent and Evolution Mining was 1.6 per cent lower.
Financial stocks fell with the big four banks sharply lower. Commonwealth Bank shed 1.5 per cent, National Australia Bank dropped 1.6 per cent, Westpac retreated 1.4 per cent and ANZ Bank declined 1.1 per cent.
Energy stocks are steady as oil prices continued to advance, with Brent, the international standard, fetching $US101.57 per barrel in early Asian trade. Speaking before today’s Republican convention in Texas, President Donald Trump downplayed concerns about oil prices and a war he said will end after the midterm elections, though hostilities show little sign of easing. A senior official from the Islamic Republic said Iran will escalate its counterstrikes if the US continues attacking its territory and infrastructure.
“The temperature just got turned up again,” said Kenny Polcari at SlateStone Wealth. “The risk premium is alive and well, and the risk to energy supplies coming out of the Gulf is real.”
Woodside Energy dipped 0.1 per cent and Santos was 0.2 per cent higher while Ampol lifted 1.2 per cent.
Technology stocks followed their Wall Street peers lower with WiseTech falling 1.1 per cent, Xero down 2.7 per cent and NEXTDC declining by 2.5 per cent.
The Australian dollar was trading at US72.16¢ at 10.36am AEST.
Overnight, the S&P 500 index fell 0.5 per cent. The Dow Jones Industrial Average fell 405 points, or 0.8 per cent and the Nasdaq composite lost 0.6 per cent.
Wall Street’s losses were broad, with retailers among the companies leading the market lower. Amazon fell 1.8 per cent and Starbucks fell 1.9 per cent. Nearly every sector within the benchmark S&P 500 lost ground, but oil companies pushed higher. Exxon Mobil rose 2.2 per cent and Chevron rose 1.9 per cent.
Oil prices drove much of the action on Wall Street, with the price of crude climbing over $US100 for the first time since July. The conflict that began in February has essentially shut down traffic in the Strait of Hormuz, where a fifth of the world’s oil supply passed before the war began.
Trump said that oil prices that have surged because of the Iran war likely won’t come down until after US midterm elections.
“Right after the election, oil prices are going to be tumbling downward,” Trump said. “I think the war’s going to end immediately after the election because they can’t hold out any longer.”
Inflation was already stubbornly high when the US started its war against Iran because of the ongoing US trade war with much of the world. That trade war is also heating up, especially between the US and its close ally and trade partner Canada.
Wall Street will get more updates this week on inflation, starting with a look at prices at the wholesale level on Thursday with the release of the Producer Price Index for August. It measures prices businesses pay for goods before they reach customers. That report will be followed up Friday with the release of the Consumer Price Index, or CPI, for August, which shows the more direct price impact for households.
The latest reports are expected to show that the rate of inflation remains above 3 per cent. That has been an issue for the Federal Reserve, which is aiming to hold inflation at a target rate of 2 per cent. The central bank has been holding rates steady, but Wall Street is leaning toward a 62 per cent chance that it will raise its benchmark interest rate at its meeting next week, according to data from CME Group.
Rising Treasury yields in the bond market were also weighing down stocks on Wall Street Wednesday.
The US Treasury Department on Wednesday said it would buy back up to $US6 billion ($8.3 billion) in long-term debt. That follows an announcement in August previewing plans for an unusually large buyback in an effort to contain rising yields, which make it more expensive for US companies to borrow money and also weigh down other investments, such as stocks.
Bond yields had been holding steady prior to the announcement, but gained ground shortly after.
“The simplest version here is that market interventions have a long history of not working very well,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott.
The yield on the 10-year Treasury, which tends to impact mortgage rates, rose to 4.85 per cent – its highest point since late October of 2023 – before easing to 4.83 per cent from 4.80 per cent late Tuesday. The yield on the two-year Treasury, which tends to track expectations for Fed moves on interest rates, rose to 4.41 per cent from 4.39 per cent late Tuesday.
Bond yields have an inverse relationship to prices. Yields rise as bond prices fall. Rising yields signal that investors are demanding a higher return from Treasurys.
Elsewhere on Wall Street, shares of Meta Platforms rose 6.6 per cent as the parent company of Instagram and Facebook launched a personal artificial intelligence agent, Muse, for people 18 and over who are looking for help with day-to-day tasks like schedules and shopping. Apple lost 0.3 per cent after unveiling its latest batch of products, including a foldable iPhone.
Markets in Europe fell.
With AP, Bloomberg
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