Aussie stocks are set to tumble this morning after another interest rate rise in the US.
Benchmark futures imply a 57-point drop, taking the ASX 200 down 0.8%.
What’s new on Wall Street?
Not even cooler-than-expected November inflation data could stand in the way of a widely expected Fed rate hike.
Chair Jerome Powell upped interest rates by 50 basis points and said there were currently no rate cuts in store for 2023.
Powell said during a press conference: “I've told you today, we have an assessment that we're not at a restrictive enough stance even with today's move and we laid out our individual assessments of what we would need to do to get there.
“What we're doing now is raising interest rates for people. So people are paying higher rates on mortgages ... There will be softening in the labour market conditions and I wish there were a completely painless way to restore price stability. There isn't."
The ‘higher for longer’ approach is expected to see interest rates land between 5.0% and 5.5% this time next year.
In addition, officials see the US unemployment rate reaching 4.6% or higher by December 2023 and sustaining above 4% beyond that.
New York markets took the news on the chin, with all four major indices finishing down.
The Nasdaq led with a 0.76% drop, the Russell 2000 shed 0.65%, the S&P lost 0.61% and the Dow trailed with a 0.42% hit.
On the sector front, health care stocks scraped a green finish. Real estate, materials and financials weighed down the markets with losses averaging more than 1%.
Commodities and currency
Oil prices were a bright spot in a sea of red overnight — crude extended its gains to around 8.3% over the last three sessions.
Even so, Oanda senior market analyst Ed Moya said crude prices pared gains after the hawkish FOMC decision sent the dollar skyrocketing higher.
“The Fed’s dot plot suggests they are forecasting a mild recession, which will weigh on crude demand over the next two years,” he explained.
Meanwhile, Moya said gold prices declined after the Fed signalled it planned to continue to raise rates next year.
“Gold’s recent gains were mainly driven on the hope that the Fed could be done with a last rate rise in February but this FOMC decision shows that is not the case.
“Gold is vulnerable to a tumble below the US$1,800 level because the Fed looks like it is set on taking policy to a very restrictive level.”
Iron ore futures also suffered a blow, falling 0.3% to trade at US$108.55 a tonne. Copper rose above with a slight gain, up 0.14% to US$3.85 an ounce.
Finally, the Aussie dollar notched a 0.13% rise against the greenback to fetch 69 US cents.
On the ASX
Corporate watchdog ASIC and Australia’s Reserve Bank will put pressure on the ASX, ensuring it keeps the CHESS system ticking over until a suitable replacement goes live.
The market regulator said it was the first time it had used this delegated power against an operator of licensed market infrastructure, intended to audit the support and maintenance of a clearing and settlement system.
RBA governor Philip Lowe said the ASX needed to make a public undertaking that it had the resources and capabilities to support the ongoing operation, as well as maintain and invest in the current CHESS to ensure it continued to service Australia's cash equities markets reliably.
In other news, supermarket giant Woolworths has agreed to back speciality pet food, accessories and services retailer Petspiration Group in a deal worth $586 million.
Woolies will walk away with a 55% stake in the brand, which operates a 276-store network and owns pet goods retailer PETstock.
The move comes one day after Woolworths sold down its stake in Dan Murphy’s owner Endeavour, sending shares in the drinks retailer and hotelier down 4.3% on Wednesday.