The ASX200 took a tumble today, unable to resist Wall Street’s downward momentum as high bond yields and strong US job openings and factory goods order data undercut hopes of swift cuts to interest rates from the US Fed.
US markets dropped between 0.7% and 1%, a descent mirrored by the Aussie bourse, which has fallen a full 1.30% or 102.50 points to 7,785.40 after setting a new 52-week high yesterday.
Ophir Asset Management head of research Luke McMillan told the Australian Financial Review that the pared-back rate cut expectations and higher bond yields weighed on more “growth-orientated sectors like tech and consumer discretionary and bond sensitive sectors like REITs”.
“More expensive tech companies like WiseTech and Xero are leading the falls as investors reassess valuations in a higher-for-longer rates environment,” McMillan said.
The Real Estate sector as a whole shed 3.03% today, with the eight biggest stocks in the sector losing between -2.11% and -5.00% across the board. Vicinity Centres shed -5.00% and Charter Hall Group (ASX:CHC) -4.62%.
Tech was in worse shape, dipping 3.87% as WiseTech (-5.02%) and Xero (-5.39%) took the brunt. Of the top five biggest tech stocks, Altium was one of the few to escape without too much damage, shedding just -0.28%.
None of the sectors made any gains today – Financials, Healthcare and Consumer Discretionary also fell between 1.30% and 2.17%.
On the green side of the ledger, just about every commodity – bar palladium – made progress.
There was strong movement across the precious metals (+1.21% to +3.61%) and nickel, aluminium, tin and zinc all enjoyed boosts of more than 1%.
Spot gold was up 0.16% to $US2,283/ounce near its fresh all-time high, while Brent crude oil added another +0.1% to rise to $US88.97/barrel.
Markets reprice for sticky inflation
Kyle Rodda, market analyst at Capital.com, joins us to discuss the market’s reaction to stickier than expected inflation, and what climbing oil and gold prices mean for the greater financial system.
“Global equities dropped and the backdrop for stocks looked less favourable last night. The risk of stickier and stubborn inflation across the globe is growing, with both supply and demand factors contributing to the dynamic,” Rodda writes.
“On the one hand, recent data, especially in the United States, is strong and suggests ongoing demand-pull price pressures.
“On the other hand, geopolitical risk is rearing its head, with energy prices jumping off the back of Israel’s assassination of a key Iranian military figure in Syria and a Ukrainian attack on a Russian oil facility.
“The re-emergence of geopolitical risk as a significant driver of markets is being signalled by gold and oil prices. Both commodities are trading positively with one another.
“Typically, a lift in oil prices, when driven solely by demand factors, will coincide with or fuel a lift in inflation expectations and (subsequently) bond yields – a negative backdrop for gold.
“However, because the lift is associated with fears of supply shocks and the risk of an escalating war, the price of gold and oil are rising in tandem, a dynamic that is often a negative omen for riskier- assets.
“OPEC+ commences its Joint Ministerial Monitoring Committee meeting today; however, despite hints to the contrary in recent weeks, the latest whispers leading into the meeting point to no change in output.
“From a technical perspective, upside momentum is building in WTI prices as the commodity hits roughly five-month highs.”
Crude oil price:
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