ASX falls after Wall Street extends losing streak; oil prices dive
By Angus Thomson
The Australian sharemarket has opened lower on Wednesday morning as world markets grapple with the prospect that high interest rates are here to stay until inflation is brought under control.
The ASX 200 was down 0.5 per cent in early trade. Energy stocks were down almost 3 per cent after being among Tuesday’s best performers, while materials continued to slide. Communication services and information technology stocks were trading marginally higher.
Webjet shares were trading 8.4 per cent higher in early trade after announcing its results.
Meanwhile, Harvey Norman shares are down after reporting a 3.6 per cent drop in net profit after tax for 2022, while PointsBet shares are down around 3 per cent after posting a $267 million loss in FY 2022.
The dip on the local market follows a 1.1 per cent fall on the S&P 500, bringing Wall Street’s losses in the past three days to 5.1 per cent. The benchmark index is down 3.5 per cent for the month with one day left in August.
The Dow Jones Industrial Average dropped 1 per cent, while the Nasdaq composite lost 1.1 per cent. Smaller company stocks also fell, dragging the Russell 2000 1.5 per cent lower.
Markets have been weaker since Federal Reserve Chairman Jerome Powell indicated Friday that the central bank will stick to its strategy of raising interest rates to try and tame the hottest inflation in four decades.
The latest wave of selling reflects a “hangover” from Powell’s speech last week and uncertainty ahead of the Labor Department’s monthly employment report on Friday, said Megan Horneman, chief investment officer at Verdence Capital Advisors.
Markets are trying to get a better sense of “how far, how fast the Fed’s going to have to go” in slowing down the economy in order to fight inflation, she said.
Energy stocks fell along with oil prices, with Brent falling 4.9 per cent to fall below $US100 per barrel and WTI dropping 5 per cent to $US92.19 a barrel. Chevron dropped 2.4 per cent.
A strong report on the job market on Tuesday morning further diminished any hopes that the Fed would be able to ease up on its inflation-fighting policy. The higher rates the Fed is imposing are meant to keep inflation in check by slowing down the economy, including the pace of hiring.
The government reported that there were 11.2 million open jobs on the last day of July. That’s near;y two jobs for every unemployed person, on average. That number was up from 11 million in June, and June’s figure was also revised sharply higher.
Investors have been closely watching economic data for any additional signs that the economy is slowing down or that inflation may be cooling or at least holding at its current level. Businesses and consumers have been hit hard by rising prices on everything from food to clothing, but recent declines in petrol prices have provided some relief.
Consumers regained some confidence in August, according to a survey from The Conference Board. Its consumer confidence index rose this month after three straight monthly declines. It also rose well above what economists expected.
The yield on the 10-year Treasury held steady at 3.11 per cent.
with AP
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