ASX set to open slightly lower as markets falter

The Bloomberg Dollar Spot Index fell 1%. The yield on 10-year Treasury bills fell four basis points to 2.84%.

On Wall Street, stocks faltered as persistently high inflation continued to weigh on the economy and kept major indexes mired in a deep recession.

The&The P 500 just saw its biggest drop in nearly two years. It smoothed out an early stumble and fell 0.1%. It is down about 18% from the record it set earlier this year. This is slightly less than the 20% point that defines a bear market. The last bear market occurred just two years ago, after the virus pandemic began.

The Dow Jones Industrial Average fell 127 points, or 0.4%, at 2:01 p.m. EST, and the Nasdaq rose 0.3%.

Cisco fell more than 10% after warning that Chinese lockdowns and other supply disruptions would wipe out sales growth in the current quarter.

Bets that strong earnings could help investors ride out this year’s turmoil have been thrown into doubt after US consumer titans flagged the growing impact of high inflation on margins and consumer spending . “In this bear market, the bad mood has been lingering and hasn’t helped at all in trying to time a market rebound,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.

“But that’s what happens in bear markets, the oversold becomes increasingly oversold. That said, that level of decline can still lead to good bear market rallies.”

Everyone is afraid that policymakers are “getting it wrong,” Lori Heinel of State Street Global Advisors told Bloomberg TV. “We’re actually a little more dovish in terms of what we think the Fed is going to do, and if they move in the summer and then they take a little break, then there’s a chance we’ll get away with it. come out without a recession.”

Treasury Secretary Janet Yellen dismissed any notion that the Federal Reserve and its counterparts should raise their inflation targets given the importance of stable price expectations at a time when the cost of living is rising.

“I don’t immediately see that as a reason to change,” the inflation target, Yellen told reporters Thursday in Bonn, Germany, referring to the potential for deglobalization to boost the trend rate of price increases. “The challenge is to meet the inflation targets that have been set.”

Michael Barr, chosen by President Joe Biden to be the Federal Reserve’s chief banking regulator, has pledged to help reduce high inflation and provide “clear rules” to govern financial innovation.

“I would be strongly committed to bringing inflation back to the Federal Reserve’s target” of 2%, Barr said in testimony before the Senate Banking Committee, which is considering his nomination.

Sales of previously owned U.S. homes fell in April to the lowest since June 2020, held back by lean inventory, as well as rising prices and mortgage rates. Contract closings fell 2.4% in April from the previous month to 5.61 million on an annualized basis.

Economic powers in the Group of Seven are determined to keep markets open, a draft statement from the G7 finance chief said on Thursday amid moves by some countries to impose export controls on scarce agricultural products.

“We are committed to keeping markets open and building resilience in agricultural and energy markets in line with climate and environmental objectives,” said the statement, which is due to be finalized before the meeting ends on Friday.

Today’s agenda

Local: New Zealand trade balance in April; Credit card spending in New Zealand in April

Overseas data: Eurozone May consumer confidence; Japan CPI April; UK GfK consumer sentiment in May, UK retail sales in April

Market Highlights

ASX futures down 5 points or -0.1% at 7062 around 4:29 a.m. AEST

  • AUD +1.5% to 70.61 US cents
  • Bitcoin +4.1% at USUS30,223.49 at 4:20 a.m. AEST
  • On Wall St: Dow -0.4% S&P500 -0.1% Nasdaq +0.4%
  • In New York: BHP +3.6% Rio +2.2% Atlassian +7.8%
  • Tesla +0.1% Apple -2.4% Amazon +1%
  • In Europe: Stoxx 50 -1.4% FTSE -1.8% DAX -0.9% CAC -1.3%
  • Spot gold +1.3% at $1,841.19/oz at 2:23 p.m. PT
  • Brent crude +2.5% to USUS111.89 a barrel
  • US Oil +2.1% to USD 111.95 per barrel
  • Iron ore +0.9% to USD 126.35 per tonne
  • 2-year yield: United States 2.60% Australia 2.50%
  • 5-year yield: United States 2.84% Australia 3.04%
  • 10-year yield: United States 2.84% Australia 3.38% Germany 0.94%
  • US prices from 12 p.m. in New York

From today’s financial review

The coalition is closing the gap with labor in the final days: the Morrison government clawed back significant ground in the last week of the election campaign and hopes that a 48-year-old low unemployment rate will help it erode that which is always a victorious advance in Labour.

The fall in the unemployment rate to its lowest level in 48 years triggers a skills warning: the latest vacancies data from the Australian Bureau of Statistics suggests that companies are trying to fill more than 400,000 positions.

The law of the jungle swallows the fear of the fiscal black hole: From the working classes to the talkative classes, almost everyone seems to have abandoned the need to even consider fiscal discipline, writes Phillip Coorey.

United States

Stocks faltered on Wall Street as persistently high inflation continues to weigh on the economy and keeps major indexes mired in a deep recession.

The&The P 500 just saw its biggest drop in nearly two years. It smoothed out an early stumble and fell 0.1%. It is down about 18% from the record it set earlier this year. This is slightly less than the 20% point that defines a bear market. The last bear market occurred just two years ago, after the virus pandemic began.

The Dow Jones Industrial Average fell 127 points, or 0.4%, and the Nasdaq rose 0.3%.

Target fell another 5% daily after losing a quarter of its value on a surprisingly weak earnings report.

Tech stocks were mixed. Cisco Systems fell 13.9% after the router and switch vendor cut its profit forecast due to supply chain constraints. Synopsis jumped 12.2% after the software company raised its financial forecast for the year.

Household goods companies, grocery store operators and food producers overall fell. General Mills fell 2.3% and Clorox 4.2%.

Expedia climbed 6.4%. Bath & Body Works fell 7% after cutting its profit forecast for the year.

Twitter executives have told employees that the US$44 billion deal to sell the company to billionaire Elon Musk is progressing as planned. Apple executives previewed its upcoming mixed reality headset to the company’s board of directors last week, indicating that development of the device has reached an advanced stage, according to people familiar with the matter.

Europe

Britain’s FTSE 100 fell on Thursday as investors around the world worried about the growing impact of inflation on economic growth and corporate profits, while Royal Mail slumped after reporting disappointing results.

The export-focused FTSE 100 fell 1.8%, joining a rout in global markets as the stronger pound weighed on consumer businesses.

Unilever, Diageo, Reckitt Benckiser and British American Tobacco lost between 1.7% and 5.3%, while supermarket chain Tesco fell nearly 4.1%.

Chris Beauchamp, chief market analyst at e-commerce platform IG, said the massive drop in US retailer Target’s share price had affected similar retailers in Europe.

“You see that at retailers this morning in Europe, (falling) expecting them to take a hit as well. There’s no hiding the bad news.

Asia

Chinese stocks ended higher on Thursday, rebounding from earlier losses as overseas investors bet easing coronavirus lockdowns could help boost the economy, while Hong Kong’s benchmark was dragged down on the downside by falling tech stocks.

China’s blue-chip CSI300 index finished up 0.19. The Shanghai Composite Index rose 0.36%. The Hang Seng index fell 2.54%.

Tech stocks slumped as weak corporate earnings coupled with waning global growth prospects boosted sales, with Alibaba and Tencent weighing the most. The latter fell 6.5% after the tech giant announced its weakest revenue increase since its IPO in 2004. Xiaomi also moved up its earnings release to later in the day.

“Tencent’s results suggest that growth will be slower for longer, so the reading by the rest of Chinese consumer-facing tech companies is fundamentally negative,” Vey-Sern Ling said. , principal analyst at Union Bancaire Privée. “However, there are reasons to be more optimistic in the second half given the growing signals of support from higher levels of government.”

Currencies

The pound hit a two-week high against a weaker dollar on Thursday, gaining respite for now from soaring inflation and a murky growth outlook that have weighed on sentiment towards the British currency.

In another volatile trading day, the British pound hit its highest level since May 5 at USUS1.25130 and was last up 1.1%.

After falling sharply on Wednesday, the pound rebounded – a move analysts attributed to an overall weak dollar.

Merchandise

Oil fluctuated during a choppy session amid fears of an economic recession and as additional lockdowns in China dampen demand prospects.

West Texas Intermediate stabilized near USUS109 a barrel as it traded in a USUS5 range on Thursday. Investors shunned stocks and many commodities after Federal Reserve officials reiterated that much tighter monetary policy awaited them to cool an overheated economy and bring inflation under control.

Crude’s outlook has also been clouded as China struggles to contain a wave of Covid-19 infections. As the financial hub of Shanghai began to emerge from a punitive lockdown, there were new outbreaks in other cities and disruptions in Beijing. The country is the largest oil importer in the world.

“Oil markets remain a volatile trade as concerns over demand destruction for crude escalate,” said Ed Moya, senior market analyst at Oanda. Despite fears of recession, the oil market remains tight and fears of a sharp drop in the “near-term outlook for crude demand are overstated”.

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