The ASX is likely to open lower after closing down 0.5% yesterday with the ASX futures down 0.2% this morning.
Wall St ended lower overnight and bond yields climbed amid uncertainty around whether the Fed will raise interest rates again. The S&P 500 and the Nasdaq each lost 0.2% while the Dow Jones shed 0.3%.
The highlight of the session overnight was Instacart (NASDAQ:CART)’s trading debut. The IPO was well received with shares opening trading at US$42 — the top of the marketed range — and ended its first day up 12%.
This listing marks one of the biggest IPOs of the year and provides confidence to other companies looking to go public.
US bonds yields lift
US Government bond yields moved higher on expectations that rates may stay higher for longer. The US 10-year bond yields rose to 4.37%, the highest level since 2007, while two-year yields edged up to 5.11%, the highest since 2006.
“The risks for headline inflation to heat up over the next couple of months are rising and that should complicate what the Fed does,” said Oanda market analyst Ed Moya.
“Do policymakers become convinced that despite a resilient labor market, pricing pressures will continue to ease? If core inflation shows it is struggling to continue to drop, the higher-for-longer rate regime will last a lot longer than the market is pricing in.”
New York Life Investments’ Lauren Goodwin shared a similar view, “Unless we see a meaningful economic slowdown, inflation is likely to fall in a slow and non-linear way. In other words, for the Fed to cut rates next summer — like the bond market has priced — we believe we’d need to see a recession”.
What happened overnight?
Here’s what we saw (source CommSec):
US markets
US sharemarkets eased on Tuesday. The Dow Jones index fell by 107 points or 0.3%, the S&P 500 index lost 0.2% and the Nasdaq index fell by 32 points or 0.2%.
Shares in Disney fell 3.6%, weighing on the Dow Jones index, after the company announced plans to double capital investment.
Shares in grocery delivery app Instacart's parent, Mapplebear Inc (CART.O), made its Nasdaq debut, trading up as much as 43% and ending 12.3% higher.
Automakers General Motors (NYSE:GM) and Ford Motor (NYSE:F) gained 1.9% and 1.8%, respectively, as the United Auto Workers union planned to announce more strikes on Friday if no serious progress is made in ongoing talks with automakers.
In US economic data, housing starts fell by 11.3% in August to a 1.283 million annualised rate (survey: 1.439 million). Building permits rose by 6.9% in August to a 1.543 million annual pace (survey: 1.44 million). Redbook chain store sales rose by 3.6% in the past week compared with a year ago (prior: 4.6%)
European markets
European sharemarkets were mixed ahead of key central bank meetings.
The continent-wide FTSEurofirst 300 index fell by 0.1%. In London, the UK FTSE 100 index rose by 0.1%.
Gains in energy stocks (+1%) offset falls in industrials. Leading industrials lower was Germany's Deutsche Post (ETR:DHLn), down 6.5%. Real estate stocks rose 1% while technology eased 0.6%.
Weighing on tech, the euro-area's 10-year Bund approached the highest levels in 12 years. Retailers fell 1.6%. But British online supermarket Ocado (LON:OCDO) Retail, a joint venture between Ocado Group and Marks & Spencer, maintained its full-year outlook. Marks & Spencer added 2.7%, while Ocado Group shares rose 1.6%.
Currencies
Currencies were mixed against the US dollar in European and US trade. The Euro rose from US$1.0675 to US$1.0717 and was back near US$1.0680 at the US close.
The Aussie dollar rose from near US64.30 cents to US64.73 cents and was near US64.55 cents at the US close.
The Japanese yen held between 147.55 yen per US dollar and JPY147.93 and was near JPY147.87 at the US close.
Commodities
Global oil prices fell by up to 0.3% on Tuesday. Brent crude traded above US$95 a barrel after which observers noted that profit-taking occurred.
Reuters reported: "Russia's government is considering imposing export duties on all types of oil products of US$250 per metric ton - much higher than current fees - from October 1 until June 2024 to tackle fuel shortages."
The Brent crude price fell by US9 cents or 0.1% to US$94.34 a barrel. And the US Nymex crude price lost US28 cents or 0.3% to US$91.20 a barrel.
Base metal prices were lower on Tuesday. Investors worried about weak demand and rising supply, the latter highlighted by the build-up of inventories in London Metal Exchange warehouses. The copper futures price slid 0.7%. And the aluminium futures price fell by 0.6%.
The gold futures price rose by US30 cents or less than 0.1% to US$1,953.70 an ounce. Spot gold was trading near US$1,931 an ounce at the US close.
Iron ore futures fell by US4 cents or less than 0.1% to US$122.16 a tonne.
Looking ahead
In Australia, the Westpac leading index is released. In company news, KMD Brands, Sigma Healthcare and Novonix (ASX:NVX) are expected to release trading updates. Flight Centre (ASX:FLT) Travel shares trade ex-dividend. The People's Bank of China announces loan prime rates.
On the small cap front
The S&P ASX Small Ordinaries lost 0.38% yesterday.
You can read more about the following throughout the day.
AdAlta Ltd (ASX:1AD) has completed enrolment of healthy volunteers in its AD-214 Phase I extension study.
Yandal Resources Ltd (ASX:YRL) has provided an update on RC drilling at its Ironstone Well-Barwidgee Project where it is testing high-priority gold targets.
Catalyst Metals Ltd (ASX:CYL) has appointed a new management team at the Plutonic Gold Operations.