Inflation data belts US equity markets
Stocks plummeted and US government bond yields soared on Tuesday, as fresh data undermined investors’ bets on the persistence of inflation and how much the Federal Reserve will need to raise interest rates to combat it.
After cutting out food and fuel, consumer prices climbed by 6.3 per cent in the year through last month, up from 5.9 percent in July and more than the 6.1 percent economists had projected.
Economists surveyed by Dow Jones had been expecting a decline of 0.1 per cent for overall inflation, with a rise of 0.3 per cent for core inflation the outcome.
Compounding the bad news two products that have been major drivers of inflation over the past year – gas and used cars – are now posting outright price cuts. But other goods and services are picking up in price so much that it is more than offsetting those declines, with rapidly rising costs for rent, health care, restaurant meals and goods such as furniture offsetting the relief consumers were feeling at the fuel pump.
Following Tuesday’s surprising data, expectations are shifting again. Some investors are even starting to price in the possibility that the central bank could lift interest rates by a full percentage point, increasing borrowing costs by the most since 1984. Among them is the Japanese bank Nomura, which in just the past week has shifted from predicting the Fed would lift rates by half a percentage point, to three quarters, to a full point on Tuesday.
The yield on the 2-year Treasury, the part of the curve most sensitive to Fed policy, soared more than 17 basis points to 3.748 per cent. The yield climbed to 3.794 per cent at one point, its highest level since November 2007.
Overnight markets plunged with The Dow Jones Industrial Average falling 3.94 per cent, .The S&P 500 dropped 4.32 per cent and the Nasdaq Composite sank 5.16 per cent.
The moves came after four straight positive sessions for US stocks, which were bolstered in part by the belief of many investors that inflation had already peaked. We are really only back to where we were last week, a case of up by the stairs down by the elevator.
Every sector in the S&P 500 index fell on Tuesday as investors reconsidered how much the Fed may need to raise interest rates, which makes borrowing more expensive for consumers and companies. Tech stocks were hit particularly hard, with Facebook-parent Meta skidding 9.4 per cent and chip giant Nvidia shedding 9.5 per cent. Just five stocks in the S&P 500 finished in positive territory. Twitter was up as shareholders approved the $44b offer from Elon Musk. It means Twitter will now try to force Elon Musk to buy the company in the courts. Other out performers included insurance, lithium and fertiliser stocks.
Currencies
US dollar up over 1 per cent against the euro, yen, and sterling after dollar index down in five of the past six sessions.
One Australian dollar fell almost 1.5 cents overnight, buying 67.31 US cents (Tue: 68.91 US cents), 58.56 Pence Sterling, 97.33 Yen and 67.53 Euro cents.
The price of bitcoin was also battered, dropping 7.34 per cent . The crypto is down almost 42 per cent cent for the past six months.
Commodities
Iron ore futures are pointing to a 1 per cent fall.
Gold lost $23.20 or 1.3 per cent to US$1717 an ounce.
Silver was down $0.37 or 1.9 per cent to US$19.49 an ounce.
Copper dropped $5.50 or 1.5 per cent to US$355.55 a pound.
Oil fell $0.47 or 0.5 per cent to US$87.31 a barrel.
Futures
The ASX is expected to fall heavily today, following US stocks.The SPI futures are pointing to a 2.3 per cent fall.
Figures around the globe
Across the Atlantic, European markets closed lower. Paris fell 1.4 per cent, Frankfurt lost 1.6 per cent and London’s FTSE closed 1.2 per cent lower.
Asian markets closed mixed. Tokyo’s Nikkei added 0.3 per cent, Hong Kong’s Hang Seng fell 0.2 per cent and China’s Shanghai Composite closed flat.
Yesterday, the Australian sharemarket added 0.7 per cent to close at 7010.
Ex-dividends
There are nine companies set to trade without the right to a dividend.
Breville Group (ASX:BRG) is paying 15 cents fully franked
Centrepoint Alliance (ASX:CAF) is paying 1 cent fully franked
Costa Group Holdings (ASX:CGC) is paying 4 cents fully franked
Glennon Small Companies (ASX:GC1) is paying 2 cents unfranked
Lovisa Holdings (ASX:LOV) is paying 37 cents 30 per cent franked
Mercury NZ (ASX:MCY) is paying 10.8666 cents unfranked
Maas Group Holdings (ASX:MGH) is paying 3.5 cents fully franked
NZME (ASX:NZM) is paying 2.6971 cents unfranked
Peppermoney (ASX:PPM) is paying 5.4 cents fully franked
Dividends payable
There are ten companies set to pay eligible shareholders today.
APA Group (ASX:APA)
ECP Emerging Growth Limited (ASX:ECP)
Heartland Group Holdings Limited (ASX:HGH)
Kkr Credit Income Fund (ASX:KKC)
NB Global Corporate Income Trust (ASX:NBI)
Nickel Mines Limited (ASX:NIC)
Objective Corporation Limited (ASX:OCL)
Reef Casino Trust (ASX:RCT)
Shape Australia Corporation Limited (ASX:SHA)
Winton Land (ASX:WTN)
Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
Copyright 2022 – Finance News Network
Source: Finance News Network
