Staff writers
The Australian sharemarket is poised to open little changed on Wednesday, as traders digest the Reserve Bank’s move to lift interest rates to a 15-year high and await key inflation figures for clues whether there’s more rate hikes to come.
ASX futures were down 8 points, or 0.1 per cent, at 8744 as of 6.26am AEST. The local bourse on Tuesday edged up 0.3 per cent after the rate call by the RBA, which flagged the possibility of further hikes, without signalling they were imminent.
The Australian dollar was trading at US69.83¢ shortly after 7am AEST, having fallen below $US70¢ on Tuesday for the first time since early August after RBA governor Michele Bullock expressed “hope” the tightening delivered so far this year is sufficient to bring inflation back to target.
Money markets scaled back bets on further moves as traders interpreted Bullock’s comments as less hawkish than the central bank’s statement on interest rates. While traders still expect the RBA will hike once more this cycle, the cash rate is now seen peaking below 5 per cent.
The Australian Bureau of Statistics will release its monthly inflation data for August at 11.30am AEST, which is likely to be an important input for policymakers, though the RBA’s favoured quarterly report will be available before the next meeting in November.
On Wall Street overnight, stocks drifted lower as long-term Treasury yields ticked higher, pressuring the market. The S&P 500 fell 0.2 per cent, the Dow Jones Industrial Average slipped 0.3 per cent and the Nasdaq composite fell 0.1 per cent.
Major indexes shifted lower after a quiet morning as rising bond yields undercut much of the heavy lifting being done by several technology behemoths. Nvidia, the market’s most influential stock, gave up an early gain and was down 0.2 per cent. Broadcom also gave up much of its gain and was up most recently by 2 per cent.
US stocks have been under pressure as oil prices have swung sharply amid the US war with Iran, helping to push Treasury yields higher. The yield on the 10-year Treasury rose to 5.25 per cent and touched its highest level in 24 years. The price of Brent crude oil fell 1.7 per cent to $US96.16 a barrel, but remains far above the roughly $US72 it cost before the war.
Mediators continued to work with the United States and Iran on reaching a deal to end the fighting and open the Strait of Hormuz. US President Donald Trump over the weekend rejected an offer from Tehran to reopen the key waterway.
Energy stocks had some of the broadest losses. Exxon Mobil fell 1 per cent.
Overall, rising oil prices have been fuelling a jump in Treasury yields. Higher yields threaten to slow economic growth by making borrowing more expensive for individuals and businesses. They can also hurt prices for stocks, especially those seen as expensive, including many technology companies that have soared because of the frenzy around AI technology.
Wall Street will see several big economic updates this week that could help investors and the Federal Reserve get a better sense of where inflation is headed and how households and businesses are dealing with high prices.
Stubbornly high inflation has been sapping consumer confidence and pressuring the Fed, which recently raised its benchmark interest rate in an effort to cool prices. The latest update of the central bank’s preferred measure of inflation will be released on Wednesday. Economists expect the personal consumption expenditures index, or PCE, to show that the rate of inflation rose 3.7 per cent in August, matching July’s reading.
Inflation rates have remained stubbornly above 3 per cent most of the year and that is well above the Fed’s target rate of 2 per cent.
Federal Reserve Bank of New York President John Williams said overnight one more interest-rate hike “late this year” may be appropriate to help contain inflation, prompting investors to dial back their expectations for an increase in October just before midterm elections.
Williams underscored the point by saying there was no urgency to act following the central bank’s decision to lift rates earlier this month.
with AP, Bloomberg
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