Following yesterday’s 1.5% decline, the ASX is set for another weak open this morning with the SPI futures trading 23 points lower (-0.32%) at 8:40 am AEST.
The ASX200 finished 110 points lower (-1.50%) yesterday at 7,195. All sectors finished the day lower, led down by Tech (-2.93%), Materials (-2.63%) and Financials (-1.71%), with the exception of Real Estate which managed a small gain (+0.09%).
The A$ dipped to a nine-month low of US64.15¢ overnight on the back of a stronger US dollar and China’s decision to prop up its slowing economy with a further rate cut yesterday.
CBA warns of increasing risk that the Aussie dollar could dip under US60¢ before the end of the year amid a deterioration in China’s economy.
Not helping today’s outlook was a continued sell-off across major US benchmarks overnight as fears around China fail to subside.
Read: China's central bank intervenes with rate cut amid economic challenges
US investors had been hoping that July’s rate hike by the Fed would be its last, but the minutes from last month’s FOMC meeting suggest more rate rises could be in store, “Most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy.”
Bond yields rose as investors digested the minutes. Yields have recently neared their highest levels since the Great Financial Crisis sent interest rates collapsing.
Big technology stocks and investments seen as particularly vulnerable to higher rates were some of the day’s heaviest weights on indexes.
What happened overnight?
Here’s what we saw (source CommSec):
US markets
US sharemarkets fell on Wednesday as traders digested the hawkish comments from US Federal Reserve officials at their last meeting. Indexes hit session lows in the final hour of trade after Fed commentary suggested that the central bank could persist with its tightening policy to counter inflation.
The Dow Jones index fell by 181 points or 0.5%, the S&P 500 index slid 0.8% and the Nasdaq index shed 156 points or 1.2%.
Tech behemoths including Meta Platforms (-2.5%) and Amazon.com (NASDAQ:AMZN) (-1.9%) along with Tesla (NASDAQ:TSLA) (-3.2%) dragged on equities benchmarks. Intel (NASDAQ:INTC) shares fell 3.6% to lead the Dow Jones index lower. Target (NYSE:TGT) shares gained 3% after the retailer's second-quarter profit beat estimates, overshadowing its annual forecast cut.
European markets
European sharemarkets edged lower on Wednesday as higher-than-expected UK inflation data weighed on sentiment. The continent-wide FTSEurofirst 300 index was slightly lower. And in London, the UK FTSE 100 index declined by 0.4% due to worries about persistent price pressures.
The annual UK consumer price inflation rate eased from 7.9% in June to 6.8% in July, the lowest rate since February 2022.
Currencies
Currencies were weaker against the US dollar in European and US trade. The Euro fell from US$1.0932 to US$1.0870 and was near US$1.0875 at the US close.
The Aussie dollar dipped from US64.79 cents to US64.16 cents and was near US64.20 cents at the US close.
The Japanese yen eased from 145.30 yen per US dollar to JPY146.39 and was near JPY146.35 at the US close.
Commodities
Global oil prices fell on Wednesday despite a large drawdown in US crude stocks as investors fretted about Chinese demand.
US crude oil inventories fell by 5.96 million barrels last week, compared with analysts' expectations for a 2.3 million-barrel drop. The Brent crude price fell by US$1.44 or 1.7% to US$83.45 a barrel. And the US Nymex crude price dipped by US$1.61 or 2% to US$79.38 a barrel.
Base metal prices slipped on Wednesday. The copper futures price shed 0.3% after China's new home prices fell for the first time this year in July. The aluminium futures price slid 0.1%.
The gold futures price fell by US$6.90 or 0.4% to US$1,928.30 an ounce. Spot gold was trading near US$1,892 an ounce at the US close.
Iron ore futures rose by US1 cent or less than 0.1% to US$104.81 a tonne as steel plants in China curb production amid a deepening crisis in the property sector.
Looking ahead:
In Australia, jobs data is released. Amcor, ASX, Beacon Lighting, Domain, Evolution Mining, Goodman Group (ASX:GMG), GQG Partners, Inghams, Origin Energy, Seven Group, Sonic Healthcare, Southern Cross Media, Steadfast, Super Retail Group, Telstra and Westpac all release earnings results. QBE Insurance and Scentre Group shares trade ex-dividend.
On the small cap front
The S&P ASX Small Ordinaries gained 0.26% yesterday. You can read more about the following throughout the day.