Overnight, the Federal Reserve once again put the US cash rate on pause but hinted at one, possibly two, rate hikes to finish off 2023. The result: a subdued market which is likely to influence the ASX today.
Fed chair Jerome Powell said there was more work to be done on bringing inflation down.
“We want to see convincing evidence really that we have reached the appropriate level, and we’re seeing progress and we welcome that. But, you know, we need to see more progress before we’ll be willing to reach that conclusion,” Powell said.
On the back of that news, ASX 200 futures are trading 22 points lower, down -0.31% as of 8:20 am AEST ahead of detailed labour force data to be released today.
What happened overnight?
Here's what we saw (source Commsec):
US markets
Were mixed on Wednesday on confirmation by the Federal Reserve that rates would stay unchanged for now. Investors were encouraged by forecasts that suggest a 'soft landing' for the US economy with the jobless rate remaining low.
Shares in megacap technology stocks were weaker. The share prices of two entrants eased with Instacart (NASDAQ:CART) down 10.7% and Arm Holdings fell by 4.1%. Shares in Coty rose 4.5% after the CoverGirl parent raised its sales forecast.
- The Dow Jones fell by 190 pts or 0.3%.
- The S&P 500 rose 0.2%.
- The Nasdaq was flat.
European markets
Were firmer on Wednesday ahead of the US central bank decision. Investors were encouraged by the news that the UK inflation rate eased from 6.8% to 6.7% in August.
Eurozone banks lifted 2% as Italy's UniCredit soared by 4.7%. Shares in Germany's Commerzbank said it expected to earn net interest income of 8 billion euros (US$8.5 billion) this year. But weighing on investor sentiment, data showed that Germany's producer prices posted the biggest year-on-year decline on record (since 1949).
- The pan-European STOXX 600 index and UK FTSE both rose by 0.9%.
Currencies
- Were stronger against the US dollar.
- The euro rose from US$1.6750 to US$1.0735 but eased to US$1.6770 after the Federal Reserve decision.
- The Aussie dollar rose from US64.50 cents to US65.10 cents before easing to US64.55 cents.
- The Japanese yen lifted from 148.15 yen per US dollar to JPY147.47 and ended US trade near JPY148.05.
Commodities
Oil prices eased on Wednesday on expectations that US interest rates would be higher for longer. US crude inventories fell in line with expectations last week.
- Brent crude fell by US81 cents or 0.9% to US$93.53 a barrel.
- US Nymex crude fell by US92 cents or 1.0% to US$90.28 a barrel.
- The gold futures price rose by US$13.40 an ounce (0.5%) to US$1,967.10 an ounce.
- The spot gold price was near US$1,940 an ounce.
- The iron ore price rose by US38 cents to US$122.54 a tonne.
- Base metal prices were mixed on the London Metal Exchange on Wednesday.
- Copper, aluminium and zinc prices fell while lead, tin and nickel eased. Traders said copper prices rose 0.7% on hopes for recovery of the Chinese economy.
In other news
ACCC blocks Transurban
The Australian Competition & Consumer Commission (ACCC) is standing in the way of Transurban Group (ASX:TCL)’s acquisition of a majority interest in Horizon Roads.
The regulator concluded that the transaction could substantially lessen competition for future toll road concessions in Victoria.
“The proposed acquisition would result in Transurban entrenching its position in Victoria and prevent the entry of a rival operator which could compete closely for future toll road concessions in Victoria. Transurban would operate every single private-sector controlled toll road in Australia,” ACCC chair Gina Cass-Gottlieb said.
Oil benchmark increased
Goldman Sachs (NYSE:GS) has increased its 12-month-ahead Brent forecast from $US93 a barrel to $US100/bbl.
“The key reason is that significantly lower OPEC supply and higher demand more than offset significantly higher US supply. Overall, we believe that OPEC will be able to sustain Brent in an $US80-$US105 range in 2024 by leveraging robust Asia-centric global demand growth (1.8mb/d) and by exercising its pricing power assertively.
“Specifically, we now assume Saudi Arabia unwinds the extra 1mb/d cut gradually starting in 2024Q2, but that the 1.7mb/d cut with 8 other OPEC+ countries remains fully in place next year.
“We believe that most of the rally is behind us and that Brent is unlikely to sustainably exceed $US105/bbl next year.
“We also believe that Brent is unlikely to sustainably drop below $US80/bbl next year because of the strong OPEC put. Moreover, Western energy policy now has less room left to fight high prices given declines in the SPR and in Iran spare capacity. Third, we remain on track for a soft landing despite the oil rally.”
What about small caps?
The S&P/ASX Small Ordinaries fell 0.46% to 2,752,10 yesterday, however remains 0.08% to the green over the last five trading days.
It has been a slow news morning, but you can read about the following and more throughout the day.
- Emyria Ltd (ASX:EMD) has secured a supply of locally available MDMA, pivotal for initiating dosing for its ethics-approved MDMA-assisted therapy (‘MDMA-AT’) trial.
- Astral Resources NL (ASX:AAR) announced the results of a positive scoping study for its flagship Mandilla Gold Project. Mandilla is in the northern Widgiemooltha greenstone belt, 70 kilometres south of the significant mining centre of Kalgoorlie, in the Goldfields region of Western Australia.
- Race Oncology Ltd (ASX:RAC) shared results from recent preclinical work performed under contract at Oncolines (Netherlands). In these studies, bisantrene was screened for anti-cancer activity in a broad panel of 143 human cancer cell lines, representing 15 distinct cancer types, alone and in combination with doxorubicin, an anthracycline chemotherapeutic that is one of the most widely used anti-cancer drugs.
- OD6 Metals Ltd (ASX:OD6) has reported initial assay results for Phase 3 drilling at its Splinter Rock clay-hosted rare earth element (REE) project, northeast of Esperance in Western Australia.
- Intra Energy Corporation Ltd (ASX:IEC) advised that field mapping targeting Lithium at the Yalgarra Project 70 kilometres east of Kalbarri in Western Australia has identified multiple pegmatite dykes intruding Archean mafic rocks.