The ASX 200 is set to open lower this morning following losses in the US market after January US CPI data came in higher than expected.
The consumer price index increased 0.3% last month after gaining 0.2% in December. The core CPI, which excludes food and energy, rose by 0.4% in January for its biggest lift in 8 months.
For the year through January, the CPI increased 3.1% after rising 3.4% in the 12 months through December.
Economists had forecast a 0.2% gain for the month for a 2.9% gain year-on-year. While higher than forecast, annual CPI gains are well down from a peak of 9.1% in June 2022.
In response to the inflation data, the Dow fell by 525 points or 1.4%, its biggest daily drop since March 2023, after falling as much as 757.5 points at session lows. The S&P 500 index also slid 1.4%, while the Nasdaq index lost 287 points or 1.8%.
The Aussie dollar fell as the USD rallied on hopes that US interest rates will remain higher for longer, while the gold price slid below $US2,000 an ounce.
Analysts’ bets for the first rate cut in the US are divided with some expecting a cut in May and others expecting the Fed to wait until June or even later this year if economic growth surprises to the upside.
What happened overnight?
Here’s what we saw (source CommSec):
US markets
US sharemarkets tumbled on Tuesday after a stronger-than-expected US consumer inflation reading drove US bond yields higher, pushing back market expectations for imminent interest rate cuts.
- Rate-sensitive megacaps like Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN) and Meta Platforms fell between 1.6% and 2.2%.
- Chip stocks such as Micron Technology (NASDAQ:MU), Qualcomm (NASDAQ:QCOM) and Broadcom (NASDAQ:AVGO) dropped between 1.1% and 4.9%.
- Walgreens Boots Alliance (NASDAQ:WBA), Goldman Sachs (NYSE:GS), Dow and Boeing (NYSE:BA) dipped between 2.3% and 4.8%, weighing on the Dow Jones index.
- Hotel chain Marriott International shed 5.6% after missing fourth-quarter revenue estimates.
- Moody's slumped 7.9% as the credit ratings and research firm's results missed expectations.
European markets
European sharemarkets closed lower on Tuesday, following the hotter-than-expected US inflation reading, as technology shares dropped 2.7% from a 23-year high.
The continent-wide FTSEurofirst 300 index lost 0.9% and the UK FTSE 100 index shed 0.8%.
Shares of chip firms ASML (AS:ASML), BE Semiconductor and Infineon shed between 3% and 5% after peer Siltronic said it expected its earnings to decline "significantly" in 2024.
Rate-sensitive real estate shares dropped to their lowest since December 1, falling 2.4%.
Currencies
Currencies were weaker against the US dollar in European and US trade.
- The Euro fell from US$1.0793 to US$1.0699 and was near US$1.0705 at the US close.
- The Aussie dollar slid from US65.33 cents to US64.41 cents and was near US64.50 cents at the US close.
- The Japanese yen eased from 149.27 yen per US dollar to JPY150.87 and was near JPY150.80 at the US close.
Commodities
Global oil prices climbed on Tuesday after the US rejected Russian President Vladimir Putin's suggestion of a ceasefire in Ukraine. But a stronger-than-expected US inflation report dimmed prospects that the Fed will cut interest rates soon, limiting crude price gains.
- The Brent crude price rose by US77 cents or 0.9% to US$82.77 a barrel.
- The US Nymex crude price lifted US95 cents or 1.2% to US$77.87 a barrel.
Base metal prices fell on Tuesday as the US dollar strengthened.
- Copper futures fell 0.4%
- Aluminium futures slid 0.2%.
The gold futures price fell by US$25.80 or 1.3% to U$2,007.20 an ounce on Tuesday as a stronger-than-expected US inflation report tempered prospects of an early interest rate cut from the US Federal Reserve. Spot gold was trading near US$1,992 an ounce at the US close.
Iron ore futures lifted US15 cents or 0.1% to US$129.02 a tonne
What’s on today?
In Australian company news, AMP, Commonwealth Bank, Computershare, Domain, Downer EDI, Evolution Mining, Fletcher Building, GUD Holdings, IDP Education, Ridley Corp and Seven Group all issue earnings updates. Graincorp hosts an AGM. Dicker Data (ASX:DDR) trades ex-dividend.
On the small cap front
The S&P ASX Small Ordinaries finished 0.07% higher yesterday, while the ASX 200 lost 0.15%.
You can read more about the following throughout the day.
- NickelX Ltd (ASX:NKL) has secured 100% of the rights to four highly prospective uranium targets, The Elliot Lake Uranium Project, via low-cost staking in Ontario, Canada.
- Poseidon Nickel Ltd (ASX:POS, OTC:PSDNF) has identified new nickel exploration targets at the Windarra Project in Western Australia.
- Torque Metals Ltd (ASX:TOR) has provided an update of its reverse circulation (RC) and diamond drill campaign now underway at its New Dawn Lithium Project, which is just 600 metres from Mineral Resources’ Bald Hill Lithium Tantalum mine.