Australian stocks are set to open little changed following a mixed night on Wall Street after inflation slowed, but not by as much as economists predicted.
The Nasdaq overcame a choppy start to finish ahead. The S&P 500 closed little changed. The Dow lost almost 0.5 per cent.
Iron ore, copper and gold rose. Oil fell to its first loss in four sessions. The Australian dollar traded briefly above 70 US cents before paring its advance.
The S&P/ASX 200 will start the day flat, according to futures action. The SPI200 edged up a single point or 0.01 per cent. The ASX 200 logged its first gain in four sessions yesterday, advancing 0.17 per cent after a strong opening rally faltered.
Wall Street
US stocks finished mixed after the main indices swung wildly in the wake of mixed inflation data. Annual headline inflation declined, but not by as much as forecast after prices increased in January.
The Nasdaq Composite led with a rise of 68 points or 0.57 per cent. The S&P 500 dipped one point or 0.03 per cent. The Dow Jones Industrial Average lost 157 points or 0.46 per cent.
The annual rate of inflation slowed to 6.4 per cent last month from 6.5 per cent in January. While last month’s reading was the lowest in 15 months, it was stronger than the 6.2 per cent anticipated by economists.
Hopes for a deeper decline were dashed by a 0.5 per cent increase in the cost of living, the largest increase in three months. Core inflation rose 0.4 per cent, ahead of the Wall Street forecast of 0.3 per cent. The annual rate of core inflation ticked down to 5.6 per cent from 5.7 per cent.
Stocks moderated early losses after most commentators agreed the data was unlikely to alter the Federal Reserve’s commitment to raising rates.
“The number would lead me to believe that they are not going to change what they have said, which is there’s more work to be done and I think that’s true,” Andrew Slimmon, managing director at Morgan Stanley Investment, said.
“While there were no major surprises in today’s [consumer price index] reading, it is a reminder that while inflation has peaked it could be a while before we see it moderate to normal levels,” Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment, said.
Fed policymakers continued to hammer the message that further rate hikes were likely. Richmond Fed President Thomas Barkin said the CPI result was “about as expected” and warned inflation was persistent. Dallas Fed President Lorie Logan said the bank would keep raising benchmark rates as long as necessary.
Treasury yields ticked higher. The yield on ten-year US government bonds climbed around five basis points to its highest since the first session of the year.
Australian outlook
A cautious outlook for the day ahead following mildly disappointing US inflation data. Wall Street swung wildly in the immediate aftermath amid confusion over how to respond to a report that was worse than official expectations, but not as bad as rumours (the so-called “whisper number”) had led some traders to expect.
The end result was a counter-intuitive rise in growth stocks, even as treasury yields rallied. The US tech sector gained 0.44 per cent. The two other sectors dominated by Big Tech (consumer discretionary, communication services) also advanced. Materials was the only other gain, rising 0.22 per cent.
Defensive sectors retreated. The highly-geared real estate sector lost 1.03 per cent, consumer staples 0.93 per cent and health 0.6 per cent.
How the S&P/ASX 200 performs will be determined to some extent by corporate earnings. Three of the market’s biggest companies report today. Commonwealth Bank, retail conglomerate Wesfarmers and Fortescue Metals top a list that also includes Cochlear, Vicinity Centres, Treasury Wine Estate, Seven Group, Pro Medicus, Pact Group, Corporate Travel Management, Fletcher Building, GUD, SkyCity, GWA and Netwealth.
The ASX 200 scored its first rise in four sessions yesterday in unconvincing manner. An early rise of 59 points was pared back to 12 points by the close as traders reduced risk ahead of the US CPI report. Dire domestic consumer confidence data added to selling pressure.
RBA Governor Philip Lowe is in the hot seat in Canberra today. The under-fire central bank chief is due to testify before the Senate Economics Legislation Committee from 12 pm AEDT. His comments will be scoured for clues to the outlook on interest rates.
The dollar jumped briefly above 70 US cents during the post-inflation gyrations in the US before trimming its rise to 0.33 per cent at 69.91 US cents.
Commodities
Oil fell after the US confirmed it will sell 26 million barrels of crude from national reserves. The US Energy Department said the release from the Strategic Petroleum Reserve was a condition of its congressional mandate under the Bipartisan Budget Act of 2015 and the Fixing America’s Surface Transportation Act.
The formal announcement doused speculation that the release might be cancelled this year after the White House released 180 million barrels from the reserve last year to help contain prices.
“This stance appears to have surprised the markets, as many had been expecting the 2023 release to be canceled and for the resupplying of reserves to start,” Ricardo Evangelista, senior analyst at ActivTrades, said.
Brent crude settled US$1.03 or 1.2 per cent lower at US$85.58 a barrel. The US benchmark, West Texas Intermediate, dropped 1.4 per cent to US$79.06.
Iron ore overcame early pressure, reversing some of Monday’s sharp fall. The most-traded May ore on China’s Dalian Commodity Exchange rallied 0.4 pe cent in daytime trade to 856.50 yuan (US$125.66) a tonne.
BHP‘s US-traded depositary receipts firmed 0.64 per cent. Earlier, the miner’s UK listing finished little changed, up 0.05 per cent. Rio Tinto added 0.96 per cent in the US and 0.69 per cent in the UK.
Gold inched off a five-week low in volatile trade. Gold for April delivery settled US$1.90 or 0.1 per cent ahead at US$1,865.40 an ounce after trading as high as US$1,881.60 and as low as US$1,852.50. The NYSE Arca Gold Bugs Index eased 0.16 per cent.
Copper was lifted by US dollar weakness ahead of US inflation data. Benchmark copper on the London Metal Exchange climbed 0.9 per cent to US$9,018 a tonne.
Nickel gained 0.06 per cent. Lead added 0.52 per cent. Aluminium fell 0.21 per cent, zinc 0.64 per cent and tin 3.26 per cent.
Battery metal miners were mixed in US trade. The Global X Lithium & Battery Tech ETF finished steady on the New York Stock Exchange. The VanEck Rare Earth/Strategic Metals ETF lifted 0.33 per cent.