Aussie stocks are in for a red open ahead of a big week of economic news.
Benchmark futures nod to a 35-point decline at the morning bell, equivalent to a 0.49% downturn.
What’s new on Wall Street?
A late selloff in New York had all four major indices seeing red on Friday.
The S&P tracked its first weekly decline in three weeks, while the Russell 2000 dipped 1.19%.
Communications services finished barely in the green, but the rest of the sectors landed below the line.
Energy stocks fared the worst, averaging a 2.33% loss, but growth sectors finished around the middle of the pack, tracking less than a 1% fall.
Among the large caps, athleisure brand Lululemon dropped 12.45% thanks to a softer-than-expected earnings report.
eCommerce giant Amazon (NASDAQ:AMZN) was also in the red (down 1.4%), but Tesla (NASDAQ:TSLA) reversed some of its recent selloffs to notch a 3.2% gain.
Looking at the week ahead, Oanda senior market analyst Craig Erlam said two blockbuster events would have Wall Street on edge.
“The last major piece of economic news before the Fed meets will be the November inflation report, which is expected to show pricing pressures are decelerating,” he explained.
“The headline reading from a month ago is expected to rise 0.3%, a tick lower from the pace in October. On a year-over-year basis, inflation is expected to decline from 7.7% to 7.3%.
“There is still a lot more work that needs to be done with bringing inflation down, but for now, it seems the trend is headed in the right direction."
Erlam said the second major headline — the Federal Open Market Committee (FOMC) decision — would be “must-see TV”.
“The Fed is expected to downshift to a half-point rate-hiking pace and yet still reiterate that they are not done raising rates.
“The Fed will likely show that rates could rise anywhere from 4.75-5.25%, which will be very restrictive and should lead to a quicker cooling of the labour market,” he concluded.
More news out from New York markets later this week, so watch this space.
Commodities and currency
Oil continues its turbulent trading pattern, finishing nearly flat following a choppy session at the weekend.
Even so, crude prices surged after President Putin said Russia could cut its oil production.
The signal comes after the G7, the EU and Australia announced a $60 cap on Russian oil exports in early December, triggering a crude oil rort.
Meanwhile, gold continues to rally, gaining 0.44% to trade at US$1,809 on Friday, while iron ore has hit the US$110/tonne benchmark.
The Aussie dollar finished near breakeven, buying 68 US cents and 55 British pence.
On the ASX
Big Four bank Westpac and Tyro Payments have abandoned acquisition talks following a due diligence period.
Tyro also said ‘no deal’ to a revised takeover bid from private equity firm Potentia, which priced in a $875 million enterprise value.
“[These] discussions have not resulted in a proposal that the board believes fairly values Tyro,” the company stated today.
In resources news, mining bigwig St Barbara is in a trading halt ahead of an acquisition and equity raise announcement.
Not much is known just yet but investors should hear more from the gold company by Wednesday.
Finally, hot on the heels of the Reserve Bank’s final meeting of the year, Janus Henderson investment strategist Frank Uhlenbruch has warned more monetary tightening is coming as the RBA seeks to tame the inflation beast.
“With few signs yet of a significant slowing in activity … the RBA has little choice but to tighten monetary conditions further,” he stated.
“Our base case view is that the cash rate peaks at a moderately restrictive 3.6% in mid-2023, making the current tightening cycle the largest and fastest in the monetary policy inflation targeting era.
“As we expect to see growth and inflation decelerate over 2023, the door opens for the RBA to take its foot off the monetary breaks in 2024 and begin bringing monetary settings back towards more neutral levels.
“We see the balance of risks tilted towards our high-case scenario, one where the RBA has to do more to stop higher inflation becoming entrenched.
“In this scenario, the cash rate is expected to peak at a restrictive 4.35% by the end of 2023 and remain at that level until late 2024.”