ASX edges up despite Wall Street slump
By Najma Sambul
The Australian market edged higher on Tuesday afternoon after a flat opening and fresh interest rate rises looming.
The S&P/ASX 200 jumped 14.9 points, or 0.2 per cent, to 7496.6 at 12.45pm AEDT.
Consumer staples and healthcare were still lifting the bourse at lunchtime as Woolworths and Coles Group gained 2.7 per cent and 2.28 per cent, respectively.
Energy had a slight bump and the big miners, including BHP, Rio Tinto and Fortescue, were all in the green.
IT and real estate weighed on the index and REA group dipped into the red, losing 1.39 per cent.
IT shares have struggled with Seek and Wisetech Global in the red, down 1.89 per cent and 1.65 per cent, respectively.
Meanwhile, healthcare (up 0.87 per cent) and consumer staples (up 1.23 per cent) lifted the index. Resmed gained over 3 per cent and Medibank had a slight bump around 1.5 per cent.
US stocks sank on Monday as Wall Street prepped for a week full of potentially market-moving events, from decisions on interest rates around the world to earnings reports from the biggest US companies.
The S&P 500 dropped 1.3 per cent, giving back some of the gains that had carried it last week to its highest level since early December. The Dow Jones Industrial Average fell 260 points, or 0.8 per cent, while the Nasdaq composite sank 2 per cent. The Australian sharemarket is set to edge lower, with futures at 7.59am AEDT pointing to a fall of 10 points, or 0.1 per cent, at the open. The ASX shed 0.2 per cent on Monday.
Markets have been veering recently on worries that the economy and corporate profits may be set for a steep drop-off, along with competing hopes that cooling inflation will get the Federal Reserve to take it easier on interest rates.
The central bank’s next decision on rates is coming on Wednesday, and most investors expect it to announce an increase of just 0.25 percentage points. That would be the smallest increase since March, following a spate of hikes of 0.75 points and then a 0.50-point increase, and it would mean less added pressure on the economy.
Higher rates combat inflation by intentionally slowing the economy, while also dragging down on prices for investments. Inflation has been cooling since the summer amid last year’s blizzard of rate hikes, but the economy has also been showing signs of concern.
The big question is whether Fed Chair Jerome Powell on Wednesday afternoon will give markets what they want to hear — hints that rate hikes will end soon and rate cuts may even be possible late this year — or stick to the Fed’s mantra that it plans to keep rates higher for longer, even if a modest recession hits.
“I think that they have no intention of cutting rates this year,” said Sam Stovall, chief investment strategist at CFRA Research, adding that the Fed waits an average of roughly nine months after its last rate hike before cutting.
“They’ll reiterate that they don’t want to make the mistakes of the 1970s,” he said, “but I think in the back of their minds, they’re going to say no matter which inflationary indicator you look at, they’re all heading in a stairstep downward pattern.”
Central banks for Europe and for the United Kingdom are also set to announce their latest increases for rates this week.
Beyond interest rates, more than 100 companies in the S&P 500 are scheduled this week to report how much profit they made in the last three months of 2022. Among them are tech heavyweights Apple, Amazon, and Google’s parent company. Because these companies are three of the four biggest on Wall Street by market value, their stock movements carry much more sway on the S&P 500 than others.
Strategists at Morgan Stanley led by Michael Wilson warn tougher times may be ahead.
“The reality is that earnings are proving to be even worse than feared based on the data, especially as it relates to margins,” they wrote in a report. “Secondly, investors seem to have forgotten the cardinal rule of ‘Don’t Fight the Fed’. Perhaps this week will serve as a reminder.”
with AP
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