Aussie stocks are poised for another day in the red as recession woes make their mark on Wall Street.
Benchmark futures point to a 0.15% drop at the open, bringing the ASX 200 down 11 points.
What’s new on Wall Street?
New York markets were subdued on Wednesday as investors consider what a Fed pivot could mean for their portfolios.
While the major indices tried to break free of the red wave in the early hours of the session, only one clinched a grey finish.
The S&P, Nasdaq and Russell 2000 all closed down less than a percentage point, but the Dow finished back where it started at 33,598 points.
Like yesterday, defensive stocks fared best in a gloomy market. However, in a slight diversion from yesterday’s strong selloff, utilities, consumer staples and real estate stocks made it into the green.
Conversely, growth stocks were among the worst of the underperformers — consumer discretionary, infotech and comms stocks dropped just under 1%.
Just under half of US stocks tracked green but the same number are also trading below their 200-day moving average.
Commodities and currency
Crude oil continues its downward spiral, hitting another fresh low thanks to a fourth consecutive day of declines.
WTI shed 2.69% of its value to fetch slightly more than US$72 a barrel, while Brent has fallen to its lowest level since January. It’s now trading below US$80 a barrel.
Gold, on the other hand, continues to gain amid the volatility. The precious metal jumped 1.11% to fetch more than US$1,800 an ounce.
On the currency side, it looks like the US dollar is shaking off the doldrums and moving back into the green.
Brokerage XM Group is tracking US paper’s rise and it reckons a narrative of higher interest rates will buoy the greenback.
“Even in the opposite case, where economic releases point to an economy heading into recession faster than previously estimated, they could prove supportive for the currency through safe-haven inflows,” the firm explained.
“However, increasing fears of a recession are likely to allow market participants to maintain the view that the Fed may need to cut sooner rather than later to treat the economic wounds.
“Therefore, whether any further strength in the US dollar will result in the resumption of its prevailing uptrend and take it to new multi-decade highs remains a mystery.”
The Aussie dollar strengthened overnight to buy 67 US cents and 55 British pence.
On the ASX
Engineering group Downer EDI is in the news — it’s alerted investors to some accounting red flags and curbed its profit guidance for FY23.
“With oversight by the board and senior management, a detailed investigation has been initiated and is being treated with the highest priority,” Downer stated today.
“The investigation is ongoing, so details are preliminary, but the adjustments appear to relate to the period between September 2019 and November 2022.”
In more positive reporting news, NZ dairy co-operative Fonterra has upped its profit guidance thanks to strong milk prices.
The consumer staple stock expects to bring in between NZ$0.50 and NZ$0.70 per share by the end of the financial year — up from its previous NZ$0.45 to NZ$0.60 target.
On the production side, CEO Miles Hurrell said milk supply from key exporting regions had been trending down over the last 12 months.
“Production in Europe and Australia continues to be down, with US milk supply showing a slight improvement in recent months,” he said.
“Here in New Zealand, our milk production is down 2.9% on the same point last season."