ASX trending higher despite energy, mining losses
By Damian Troise, Alex Veiga and Lachlan Abbott
The Australian sharemarket has moved higher in morning trade, with falls in energy and mining stocks holding back the index. All other industry sectors rose following an up-and-down session on Wall Street overnight.
The S&P/ASX 200 was 0.3 per cent higher at 12.21pm AEST, adding 18 points to 6,526.50. Energy stocks declined by 2.1 per cent as oil prices again fell overnight amid investor fears that interest rate rises could drive the US into recession, reducing demand for fuel. Woodside dropped by 2.9 per cent while Santos was down 2.1 per cent.
Falling iron ore prices weighed on the mining sector, with Chinese futures declining on Wednesday to their lowest level in 16 weeks according to Reuters, due to worries about an oversupply of steel in China. Iron ore giant BHP lost 2.5 per cent, Rio Tinto shed 2.6 per cent and Fortescue declined by 3.4 per cent. The entire materials sector lost 1.9 per cent.
All other sectors were slightly higher, with real estate stocks leading the way, rising by 2.3 per cent. Banking stocks were also trending positively, and the interest-rate-sensitive tech sector was moving 1.5 per cent higher.
The lifters: Genesis Energy 4.9%, IPH 4.5%, James Hardie Industries 4.3%
The laggards: Lake Resources -17.9%, St Barbara Limited -12.8%, Ramelius Resources -8.7%
A choppy day of trading on Wall Street ended with a modest pullback for stocks overnight, the latest bout of volatility for the market amid concerns about inflation and uncertainty over whether rising interest rates will help or hinder the economy.
The indices were on pace for a modest gain before slipping into the red in the final minutes of trading. The S&P 500 dropped 0.1 per cent, with the stocks in the benchmark index about evenly split between gainers and decliners. The Dow Jones Industrial Average gave up 0.2 per cent and the Nasdaq fell 0.1 per cent.
Energy companies helped pull the market lower after the price of US crude oil fell 4 per cent. Technology companies also lost ground, which helped keep gains in health care, real estate and other sectors in check.
Investors closely watched testimony to Congress from Federal Reserve Chair Jerome Powell. He reaffirmed the central bank’s determination to raise interest rates and slow inflation.
The choppy trading followed a solid rally on Tuesday in what has been a turbulent period for the broader market, with daily and sometimes hourly swings from sharp gains to losses. The benchmark S&P 500 is currently in a bear market, which means it has dropped more than 20 per cent from its most recent high, which was in January. It has also fallen in 10 of the last 11 weeks, but is holding on to gains so far for this week.
Much of the market’s decline has been tied to concerns about rising inflation and the Federal Reserve’s plan to aggressively raise interest rates to temper inflation’s impact on consumers and businesses.
“There have been some new hurdles put in front of us,” said Sylvia Jablonski, chief investment officer at Defiance ETFs. As a result, she said, many investors are “sitting on the sidelines.”
In his testimony, Powell underscored the Fed’s determination to raise interest rates high enough to slow inflation, a commitment that has fanned concerns that the central bank’s fight against surging prices could tip the world’s largest economy into recession.
“We’re not trying to provoke and don’t think that we will need to provoke a recession,” Powell said. “But we do think it’s absolutely essential that we restore price stability, really for the benefit of the labor market as much as anything else.”
Powell’s testimony came a week after the Fed raised its benchmark interest rate by three quarters of a percentage point, its biggest hike in nearly three decades. With inflation worsening, the Fed’s policymakers also forecast a more accelerated pace of rate hikes this year and next than they had predicted three months ago, with its key rate reaching 3.8 per cent by the end of 2023. That would be its highest level in 15 years.
AP
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