The ASX was regaining some momentum this week but it looks like the wind is well and truly out of its sails now, with ASX Futures indicating a sharp 0.8% or 63-point drop in early trading.
This is due to high inflation data for the US (which came in at 0.4% compared to an expected 0.3% for March), which in turn shattered any hopes of an early interest rate cut and drove all three major US markets lower.
The annual inflation growth rate lifted from 3.2% to 3.5% compared to an expectation of 3.4 and core CPI also increased by 0.4% in March compared to an expected 0.3%.
US Treasury bond yields applied pressure from the opposite direction, exceeding 4.5% to brush their highest levels since November.
What happened overnight?
(source: Commsec)
US and European markets
Interest rate sensitive stocks felt the brunt of last night’s bad news, with real estate down 4.1% in the biggest single-day loss since June 2022. Housing stocks followed suit with a 4.3% drop.
Microsoft (NASDAQ:MSFT) fell 0.7% and Apple (NASDAQ:AAPL) 1.1% while bank shares slid 0.9% and industrial stocks 1.4% as fears for the greater US economy’s health under prolonged high interest rates grew.
The Dow Jones slid a full 422 points or 1.1%, the S&P500 1% and the Nasdaq 0.8% or 136 points.
In Europe, things looked a little different. Markets initially dropped after the US CPI data was revealed but recovered during trading as investors turned their attention to the EU Central Bank’s monetary policy decision to be announced tonight.
The real estate sector again suffered, sliding 1.6%, but banks lifted 0.9% and energy stocks 0,6%.
The FTSE300 gained 0.2% while the FTSE100 gained 0.3%.
Currencies and commodities
The US dollar strengthened overnight as CPI data drove the greenback higher.
The Euro fell from US$1.0867 to near US$1.0740 at trading close, the Aussie fell from US66.28 cents to near US65.10 cents and the Japanese Yen slid from 151.78 yen per US dollar to near JPY153.10 at the US close.
An airstrike killing three Hamas leaders overnight has complicated peace talks in Israel, driving oil prices up about US$1.
US crude stocks also climbed by 5.8 million barrels last week, more than double the rise analysts had anticipated, although that wasn’t enough to keep prices stable.
Brent crude rose by US$1.06 or 1.2% to US$90.48 a barrel while US Nymex gained US98 cents or 1.1% to US$86.21 a barrel.
Base metals ended their winning streak, faltering in the face of a strong US dollar. Copper futures slid 0.1% and aluminium 0.4% while iron ore fell by US31 cents or 0.3% to US$104.02 a tonne.
Gold also stumbled, sliding by US$14 or 0.6% to US$2,348.40 an ounce in response to US economic movements.
On the small cap front
The ASX Small Ordinaries once again followed the ASX up yesterday, gaining 0.22%.
You can read about the following and more throughout the day on our website.