A flat open on the ASX looks likely this morning with the futures trading down just 1 point at 9am AEDT.
This follows underwhelming US inflation data overnight that has reinforced speculation the Federal Reserve will keep rates high for some time before a cut is considered.
Prices rose 3.1% from the prior year and 4% when excluding energy and food. October prices rose 0.1% from the prior month, while expectations were for a flat reading.
The CPI data hasn’t altered bets the Fed will hold rates steady at its meeting on Wednesday but it does bring into question the market’s aggressive pricing of a dovish pivot in 2024.
The inflation data pushed Wall Street to finish higher — the Dow Jones ended the session at its highest level since January 2022. Oil sunk and bond yields also edged lower.
What happened overnight?
Here’s what we saw (source Commsec):
US markets
US sharemarkets rose on Tuesday, following US inflation data that kept expectations of an interest rate cut in May 2024 intact, while investors awaited the US Federal Reserve's policy decision.
- The Dow Jones index rose by 173 points or 0.5%.
- The S&P 500 index gained 0.5% - touching its highest level since January 2022.
- The Nasdaq index added 101 points or 0.7%.
Long-dated US government bond yields fell on Tuesday after data showed underlying US inflation came in line with forecasts, reinforcing views the US Federal Reserve will hold rates steady after its two-day policy meeting on Wednesday.
The US Treasury sold US$21 billion of 30-year notes at a yield of 4.344% into solid demand. The US 10-year Treasury yield fell by 3 points to 4.20%. But the US 2-year Treasury yield was steady at 4.73%
European markets
European sharemarkets dipped on Tuesday, with the oil and gas sector losing 1.4%, following a slide in oil prices on supply concerns.
The German and French benchmark indexes both hit record highs during the trading session, before paring gains, after data showed US consumer prices unexpectedly rose last month.
- The continent-wide FTSEurofirst 300 index slid 0.2%.
- In London, the UK FTSE 100 index inched lower by less than 0.1%.
Commodities
Global oil prices fell over 3% on Tuesday, hitting their lowest level in six months, on signs of robust supplies. The weekly level since early July, and the US government raised its estimate projection last month.
The Brent crude price fell by US$2.79 or 3.7% to US$73.24 a barrel.
The US Nymex crude price shed US$2.71 or 3.8% to $68.61 a barrel.
Base metal prices were steady on Tuesday.
- Copper futures gained 0.2%.
- Aluminium futures settled unchanged.
The gold futures price fell by US50 cents or less than 0.1% to US$1,993.20 an ounce. Spot gold was trading near US$1,979 an ounce at the US close.
Iron ore futures added US50 cents or 0.4% to around nine-month highs of US$135.66 a tonne, as hopes resurfaced for more stimulus from policymakers in top consumer China to spur its economic recovery.
Currencies
Currencies were mixed against the US dollar in European and US trade.
- The Euro rose from US$1.0763 to US$1.0820 and was near US$1.0795 at the US close.
- The Aussie dollar fell from US66.08 cents to US65.41 cents and was near US65.60 cents at the US close.
- The Japanese yen eased from 144.80 yen per US dollar to JPY145.79 and was near JPY145.50 at the US close.
Looking ahead
In Australia today, the CBA Household Spending Insights report is scheduled; the Mid-Year Economic and Fiscal Outlook is released, and the Council of Financial Regulators quarterly statement is due. Orica hosts an annual general meeting.
On the small cap front
The S&P ASX Small Ordinaries closed up 0.09% yesterday, while the ASX 200 gained 0.50%.
You can read more about the following throughout the day.