Much more evidence is required to show that inflation is cooling

 

Stocks were mostly weaker Wednesday as traders parsed through a summary of the Federal Reserve’s most recent meeting, looking for clues on the central bank’s next move against inflation.

The Dow Jones Industrial Average dropped 0.26 per cent. The S&P 500 fell 0.16 per cent, while the Nasdaq Composite rose 0.13 per cent.

Fed officials have noted that inflation data received over the past three months showed a welcome reduction in the monthly pace of price increases but stressed that substantially more evidence of progress across a broader range of prices would be required to be confident that inflation was on a sustained downward path. There are mounting concerns that the Fed will continue hiking rates spooked investors overnight and pushed stocks to their worst day of 2023.

In company news, shares of Palo Alto Networks popped 12 per cent after the cybersecurity company lifted its earnings forecast for the year.

Crypto exchange platform Coinbase topped revenue expectations, but shares fell 4 per cent.

Intel's shares declined over 2 per cent following the company's announcement of a more than 60 per cent reduction in its quarterly dividend, aiming to create long-term value and financial flexibility during macroeconomic uncertainty, subsequent to the previous year's fourth-quarter earnings miss.

Tesla CEO Elon Musk and his team are meeting with Governor Gavin Newsom to discuss job creation and expansion efforts in California, with a focus on hiring engineers skilled in research development and artificial intelligence for the company's new engineering headquarters.

On EV related news, lithium prices in China have fallen by almost a third in the past three months due to weaker demand for electric vehicles. There are also concerns over the strength of EV demand in China, reduced subsidies, and low household confidence which have driven prices down by 29 per cent from November highs.

Overnight, S&P 500 sectors closed mostly lower. Materials, and Consumer Discretionary were the only two finished higher, whilst Real Estate was the biggest laggard.

Looking to Europe, Investors increase bets on ECB lifting rates to all-time high. Investors are betting that the European Central Bank will raise interest rates due to the eurozone economy's resilience and signs of inflation being tougher to control than expected. Swap markets are pricing in a jump in the ECB's deposit rate to 3.75 per cent by September, which would match the benchmark's 2001 peak.

Germany is planning a US-style tax credit system for renewable energy to counter Biden's IRA and reduce reliance on China green tech; credits would provide incentives for solar, wind and grid investments but needs approval from Brussels to be implemented.

Futures

The SPI futures are pointing to a 0.3 per cent fall.

Currency

One Australian dollar at 8:40 AM has weakened compared to the US dollar yesterday buying 68.05 US cents (Wed: 68.56 US cents).

Commodities

Iron ore futures are pointing to a 0.05 per cent gain.

Gold lost 0.5 per cent. Silver dropped 1.7 per cent. Copper fell 1.01 per cent and oil lost 3.2 per cent.

Figures around the globe

Across the Atlantic, European markets closed mixed. London’s FTSE fell 0.6 per cent, Frankfurt added 0.01 per cent while Paris closed 0.1 per cent lower..

In Asian markets, Tokyo’s Nikkei lost 1.3 per cent, Hong Kong’s Hang Seng fell 0.5 per cent while China’s Shanghai Composite closed 0.5 per cent lower.

Yesterday, the Australian sharemarket closed 0.3 per cent lower at 7314.50.

Ex-dividends

Australian United Investment Company (ASX:AUI) is paying 17 cents fully franked
Codan (ASX:CDA) is paying 9 cents fully franked
Diversified United Investment (ASX:DUI) is paying 7 cents fully franked
Enero Group (ASX:EGG) is paying 6.5 cents fully franked
GWA Group (ASX:GWA) is paying 6 cents fully franked
IRESS (ASX:IRE) is paying 30 per cent unfranked
JB Hi-Fi (ASX:JBH) is paying 197 cents fully franked
Platinum Asia (ASX:PAI) is paying 2.5 cents fully franked
Platinum Capital (ASX:PMC) is paying 3 cents fully franked
VGI Partners Global (ASX:VG1) is paying 4.5 cents fully franked
Whitehaven Coal (ASX:WHC) is paying 32 cents fully franked

Dividends payable

Dexus Industria REIT (ASX:DXI)
Dexus Convenience Retail REIT (ASX:DXC)

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
Disclaimer

The views, opinions or recommendations of the commentators in this presentation are solely those of the author and do not in any way reflect the views, opinions, recommendations, of Sequoia Financial Group Limited ABN 90 091 744 884 and its related bodies corporate (“SEQ”). SEQ makes no representation or warranty with respect to the accuracy, completeness or currency of the content. Any prices published are accurate subject to the time of filming and shouldn’t be relied upon to make a financial decision. Commentators may hold positions in stocks mentioned and companies may pay FNN to produce the content at times. The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian Financial Services Licensee before making investment decisions. To the extent permitted by law, SEQ excludes all liability for any loss or damage arising in any way including by way of negligence.
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