The Australian stock market may start its day higher, despite Wall Street’s struggle to maintain any of its pre-session gains.
Key points:
- Investors are worried that aggressive US Fed rate hikes could lead to recession
- Australian dollar has fallen 9.6% since April high (76.6 US cents)
- Oil prices fell 4% on concerns that global fall could reduce fuel demand
ASX futures rose 0.4% to 6,412 points at 8:40 a.m. Thursday.
U.S. markets were affected by comments on inflation from Federal Reserve Chairman Jerome Powell, who appeared before the Senate Banking Committee on Wednesday (local time).
He said the Fed was “strongly committed” to reducing inflation, which had reached its highest level in 40 years, while trying not to cause a recession in the process.
However, Powell said achieving a “soft landing” for the US economy would be “very challenging”.
The Fed chairman said he believes the US economy is strong right now, but acknowledged that a recession could happen.
“It’s not our expected result, but it’s certainly a possibility,” he said.
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“And frankly, the events of the last few months around the world have made it harder for us to get what we want, which is 2 percent inflation and a still strong labor market.”
The UK is also struggling with rising cost of living. The latest figures show that inflation rose to 9.1 per cent in May, a new 40-year high for the British economy.
“Global forces” are sinking the Australian dollar
The Australian dollar was buying 69.2 US cents, after falling 0.7 per cent overnight.
But it fell 1 percent even sharper against the eurozone and Japanese currencies, to 65.5 cents and 94.3 yen.
“The next sharp slowdown in the global economy will be a burden on the Australian dollar because it is very sensitive to global forces,” Commonwealth Bank foreign exchange strategist Carol Kong said.
“In fact, our forecast that the Australian dollar will weaken to 62 US cents next year is based on a large expected drop in Australian commodity prices.”
“We assume commodity prices will fall by about 40 percent by the end of 2023 according to the forecasts of our commodity analysts.”
Iron ore fell 3 percent more to $ 111.50 a tonne, according to ANZ data. This steelmaking material is Australia’s largest export to China, which is experiencing an economic slowdown.
Ms Kong said: “The recent fall in iron ore prices reflects market concerns that China’s promise to boost investment in infrastructure may not materialize given China’s zero COVID policy.
“He hasn’t left the forest yet”
Investors are trying to gauge the extent to which stocks may fall as they weigh on the risks to the economy, with the US Fed raising rates to reduce rising inflation.
The S&P 500 fell more than 20 percent earlier this month from a record high in January, confirming the common definition of a bear market, with the benchmark index last week recording its weekly percentage drop. largest since March 2020.
Last week, the ASX 200 also experienced its worst trading week since the initial sale of COVID-19. It has fallen by about 15 percent since its all-time high in August, placing it firmly in correction territory.
“Markets remain volatile,” said King Lip, chief strategist at Baker Avenue Asset Management in San Francisco.
“Certainly we are not out of the woods yet … the worries are still there.”
Overnight, the S&P 500 lost 0.1 percent to close at 3,760 points. The Nasdaq Composite fell 0.2% to 11,053, while the Dow Jones index fell 0.2% to 30,483.
The three major US indices spent much of their day in positive territory, before falling in the last hour of trading.
In the company’s news, Moderna’s shares rose 4.7 percent after the company said an updated version of its COVID-19 vaccine triggered a strong immune response against Fast spreading omicron.
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Fears of recession are sinking oil prices
Oil prices fell as investors worried that aggressive rate hikes by the US Fed and other central banks could push the global economy into recession, slowing fuel demand.
Brent crude oil futures fell 4.3% to $ 109.74 a barrel, the lowest level in a month.
Cash gold rose 0.3 percent to $ 1,837.53 an ounce.
“Gold rose as safe haven purchases rose amid fears of recession,” ANZ economists Daniel Hynes and Brian Martin wrote in a research note.
“The threat of an economic downturn is likely to provide a foothold in gold prices, despite central banks aggressively raising rates to control inflation.”
ABC / Reuters
Posted 1 hour 1 hour ago Wed, 22 June 2022 at 21:35, updated 23 m ago, 23 minutes ago, 22 June 2022 at 22:43