The Australian share market is predicted to open lower today, down 1% to 7,935 points – spooked by US markets.
Tech stocks dumped
Overnight on Wall Street investors dumped technology stocks, causing the Nasdaq to slip 126 points or 0.7%. The Dow Jones fared worse, dropping by 533 points or 1.3%, while the S&P 500 index decreased by 0.8%.
There was a broad sell-off of technology, small-cap and financial shares as economic concerns overshadowed optimism regarding potential interest rate cuts.
The Russell 2000 index fell 1.9%, marking its second consecutive day of decline.
Major financial institutions Goldman Sachs (NYSE:GS) and JPMorgan Chase (NYSE:JPM) both dropped by 3.2%.
Domino’s Pizza saw a significant decline of 13.6% after missing quarterly same-store sales estimates, experiencing its worst day since December 2008.
Pharmaceutical company Eli Lilly (NYSE:LLY) fell 6.3% following Roche’s announcement of promising early-stage trial data for its new weight loss drug.
Economic data revealed that initial jobless claims rose by 20,000 last week to 243,000, the highest level since August 2023.
The Philadelphia Fed manufacturing index improved from 1.3 in June to 13.9 in July. The Conference Board leading index fell 0.2% in June.
ECB keeps rates on hold
Over in Europe, the Governing Council of the European Central Bank (ECB) kept interest rates on hold but hinted that the September meeting could bring changes.
The bank downgraded its outlook on the euro zone’s economic prospects and predicted a continued decline in inflation.
"In line with expectations, the inflationary impact of high wage growth has been buffered by profits," ECB President Christine Lagarde said in a speech in Munich.
"Monetary policy is keeping financing conditions restrictive.
"At the same time, domestic price pressures are still high, services inflation is elevated and headline inflation is likely to remain above our target well into next year."
The continent-wide FTSEurofirst 300 index fell by 0.3%, with the technology sector declining for a fourth consecutive session, down 1.8% due to a continued sell-off in chip stocks.
By contrast, the UK FTSE 100 index gained 0.2%. British earnings excluding bonuses grew by an annual 5.7% in the three months to May, aligning with market expectations.
Currencies and commodities
Currencies weakened against the US dollar in European and US trade.
The Euro declined from US$1.0938 to US$1.0892, the Australian dollar dipped from US$0.6742 to US$0.6697, and the Japanese yen slid from 155.94 yen per US dollar to 157.40 yen.
Global oil prices remained steady on Thursday as investors balanced concerns about a US economic slowdown with rising expectations of imminent interest rate cuts by the US Federal Reserve.
Brent crude rose by 3 US cents to US$85.11 per barrel, while US Nymex crude fell by 3 US cents to US$82.82 per barrel.
Base metal prices fell on Thursday, with copper futures dropping 3% to three-month lows, and aluminium futures slipping 0.9%.
The gold futures price slipped by US$3.50 to US$2,456.40 per ounce, though gold remained near the record high reached in the previous session.
Spot gold traded near US$2,444 per ounce at the US close.
Iron ore futures fell by 21 US cents to US$108.73 per tonne on Thursday, impacted by the weakening steel market in China and anticipation of stimulus measures from Beijing's Third Plenum.
Labour data in
Here in Australia, economists are crunching the latest labour force data.
CreditorWatch chief economist Anneke Thompson had this to say:
“Today’s Labour Force data will likely be taken as benign by both markets and the RBA.
“Trend unemployment has remained flat at 4.0 per cent for four straight months now, while the trend employment to population ratio has been relatively steady at around 64.1 per cent since mid-2022.
“This indicates that while jobs growth has been strong, it has broadly kept up with population growth since the re-opening of borders in mid-2022.
“The unemployment rate remains well below pre-Covid levels, and labour force conditions are still strong, though not over-heating.
“Overall, this is positive news for the RBA, who are keen to maintain strong employment while getting inflation back into the target band – the ultimate threading of the needle.
“So far, they are succeeding on the employment side, but it remains to be seen if inflation can be pushed back into the band at the current monetary policy setting.
What does this mean for the economy?
“All CreditorWatch’s leading indicators derived through our Business Risk Index (BRI) data for June 2024 point to slowing business conditions over the next 12 months.
“Inventories are being run down, and the average value of invoices held by businesses has fallen 49.9% over the year to June 2024.
“We expect that with slowing business conditions, employment growth will slow down considerably over the latter half of 2024 and in to 2025, pushing the unemployment rate up.
“In terms of the fight against inflation, this is good news. And given that the unemployment rate will be rising off such a low base, the RBA still has a chance of maintaining close to full employment, even if the unemployment rate reaches 4.5%.”
Market watch
- S&P 500: -0.8% to 5,544 points
- Nasdaq: -0.7% to 17,871 points
- FTSE 100: +0.2% to 8,204 points
- EuroStoxx 50: -0.1% to 4,870 points
- Australian dollar: -0.3% at 67.08 US cents
- Spot gold: -0.5% to $US2,444/ounce
- Bitcoin: -0.4% to $US63,854
Source: ABC