A fall on Wall St overnight centred on weak consumer confidence and a higher interest rate outlook has the ASX set to open lower this morning — the ASX futures were down 0.3% to 7,046 at 8:30am (AEST).
All three major US indexes ended the session at three-month lows, while the Dow logged its biggest one-day percentage drop since March.
US consumer confidence dropped to a four-month low in September as consumers worry about fuel and grocery prices, along with high borrowing costs.
Meanwhile, benchmark 10-year US treasury yields reached 16-year highs following the Fed’s hawkish term rate outlook last week.
Adding to investor worries is the potential of a partial US Government shutdown this week as Republicans block attempts to pass a budget. A shutdown would halt payments to government workers, disrupt the country’s economy and harm the country's credit.
Inflation data out today
August CPI figures are due to be announced at 11:30am (AEST) this morning.
NAB expects the August CPI Indicator to rise to an annual pace of 5.2% from July’s 4.9%, in line with the consensus. The bank expects a surge in fuel prices (+8.5%) to be the main driver. It also expects fruit and vegetable prices to slide further in August after strong growing conditions over winter.
"More broadly, food inflation has slowed from nearly 10% to 5.6% year-on-year in July and [we] expect it to cool further to below 4% year-on-year in August," NAB said.
RBC Capital Markets also notes the jump in fuel prices as a key driver of headline CPI, saying the 9% increase in fuel prices for the month will account for around a 0.3% rise in CPI in the month.
It also expects increases in housing, alcohol and tobacco, and insurance and finance. RBC anticipates year-over-year inflation in August of 5.3% and makes note that “forwards still imply one last hike in the RBA cycle, though the risk is spread over the next six meetings (to May 2024).”
What happened overnight?
Here’s what we saw (source CommSec):
US markets
US share markets sank on Tuesday as consumer confidence in the US economy waned and investors contemplated a protracted period of high interest rates. JPMorgan Chase (NYSE:JPM) CEO Jamie Dimon warned interest rates may need to rise further to tamp down inflation.
Bank stocks declined with the SPDR S&P Regional Banking ETF falling 1.6%. Wells Fargo (NYSE:WFC) shares slid 2.2%. Amazon.com (NASDAQ:AMZN) shares dropped 4% as the US Federal Trade Commission filed a long-awaited antitrust lawsuit against the online retailer.
The Dow Jones index fell by 388 points or 1.1%, its worst day since March 22. The S&P 500 index lost 1.5% and the Nasdaq index shed 208 points or 1.6%, both falling to the lowest levels since around early June.
European markets
European sharemarkets fell for a fourth day on Tuesday, with rate-sensitive technology (-1.9%) and real estate (-2%) stocks pressured by surging bond yields.
European luxury giants LVMH and Richemont weakened 1.4% and 3% as investors remain concerned about a disappointing post-pandemic recovery in China and faltering US sales. Shares of Norwegian company Nel tumbled 11% due to weak sentiment among hydrogen stocks.
The continent-wide FTSEurofirst 300 index fell by 0.6%. But the UK FTSE 100 index ended broadly flat.
Currencies
Currencies were mixed against the US dollar in European and US trade. The Euro fell from US$1.0607 to US$1.0560 and was near US$1.0570 at the US close.
The Aussie dollar rose from US63.86 cents to US64.20 cents and was near US63.95 cents at the US close.
The Japanese yen firmed from 149.17 yen per US dollar to JPY148.75 and was near JPY149.10 at the US close.
Commodities
Global oil prices climbed as much as 0.8% on Tuesday as investors weighed expectations of tighter crude supply against demand concerns stemming from an uncertain global economic outlook. The Brent crude price rose by US67 cents or 0.7% to US$93.96 a barrel. And the US Nymex crude price added US71 cents or 0.8% to US$90.39 a barrel.
Base metal prices were mixed on Tuesday. The copper futures price fell by 0.7%, dragged down by Chinese demand concerns and higher inventories. But aluminium futures gained 0.9%.
The gold futures price fell by US$16.80 an ounce or 0.9% to US$1,919.80 an ounce. Spot gold was trading near US$1,900 an ounce at the US close.
Iron ore futures fell by US25 cents or 0.2% to US$120.93 a tonne after the re-emergence of debt issues at China Evergrande (HK:3333) Group brought the nation's property crisis back into focus.
On the small cap front
The S&P ASX Small Ordinaries lost 0.48% yesterday.
You can read more about the following throughout the day.