The ASX is likely to follow US markets down in early trading, with futures pointing to an 18-point or 0.3% dip in early trading.
Megacap stocks drove the US markets down, primarily Facebook parent company Alphabet's 9.5% drop after its cloud division missed revenue expectations. Apple, Meta, Intel, and Amazon also fell, shedding 1.4%, 4.2%, 5.1% and 5.6%, respectively.
Microsoft avoided the bloodletting, gaining 3.1% after first quarter earnings results beat Wall Street’s estimates.
The Dow Jones index contracted by 105 points or 0.3%, while the S&P 500 and the Nasdaq indices dipped 1.4% and 2.4%.
The Bank of Canada maintained its key policy rate at 5%, acknowledging a narrowed path to avoid recession.
In Europe, the markets gained marginally despite mixed earnings reports and caution ahead of a possible interest rate rise by the European Central Bank.
Miners led indices 0.9% while Real Estate weighed them down with a 1.9% fall.
The FTSEurofirst 300 index gained 0.1% and the UK FTSE 100 gained 0.3%.
Currencies and commodities
The Euro, Australian dollar, and Japanese yen all weakened against the US dollar in overnight trading.
The Euro dipped to near US$1.0570, while the Australian dollar settled around US63.10 cents and the yen edged closer to JPY150.05 at the US close.
Oil prices surged, driven by rising concerns over escalating conflict in the Middle East, but gains were curtailed as US crude inventories increased by 1.4 million barrels to 421.1 million barrels—exceeding analysts' forecasts.
Brent crude advanced by US$2.06 to US$90.13 a barrel, and Nymex crude rose by US$1.65 to $85.39 a barrel.
Base metal prices presented a mixed bag, with a robust US dollar counterbalancing support from China's economic stimulus.
Copper futures prices decreased by 1.1%, whereas aluminium prices appreciated by 1.3%. Iron ore futures inched up by 0.2% to US$118.48 a tonne.
Gold futures rose by 0.4% to US$1,994.90 an ounce, and spot gold was near US$1,980 an ounce at the US close.
In Australia, attention will turn to international trade prices data, as well as remarks from Reserve Bank of Australia Governor Bullock.
Investors now price the odds of another quarter-point RBA hike to 4.35% on November 7 at 80%, doubling in a day, according to Bloomberg.
Major companies, including Fortescue Metals and Brambles (ASX:BXB), will release production results and earnings reports, respectively.
The European Central Bank (ECB) is slated to announce its policy decision. Across the Atlantic, the US prepares for data releases on GDP and jobless claims, along with earnings reports from giants like Amazon and Ford.
ECB expected to hold rates as recession risk mounts
Capital.com senior market analyst Daniela Hathorn explores the impact of high oil prices and tightening monetary conditions on possible rate hikes by the ECB.
“Yields have risen across the Eurozone, which has helped to tighten monetary conditions, strengthening the ECB’s position to hold rates,” Hathorn writes.
“The recent tensions in the Middle East have also raised concerns about the already dampening growth prospects in the region.
“But, with oil prices having risen since the last meeting, and with the likelihood that they remain elevated until risks in the Middle East region dissipate, we may see upward pressures on inflation going forward, which could make the ECB’s life much harder.
“Prior to the pandemic, most central banks would have deemed a rise in oil prices as somewhat deflationary as it reduced purchasing power and competitiveness.
“But in the current inflationary environment, where bringing inflation back to target has been a real concern for policymakers, we may see the ECB opting for a higher risk of recession over their credibility about controlling inflation being undermined.
“This could mean further rate hikes, albeit unlikely at the meeting this week.
“This likely means continued hawkish commentary from President Christine Lagarde at the press conference, even if we see no hike this time around.
“She may opt to place greater emphasis on non-interest rate policy tools to get her point across, including the possibility of a quicker unwind to reinvestments from the Pandemic Emergency Purchase Programme (PEPP).
“The Euro has been showing some resilience in recent weeks, rising to a 5-month high against the British Pound (EUR/GBP) and breaking above its descending channel for the first time since it started back in July against the US Dollar.
“EUR/USD is currently reversing some of the moves from earlier in the week as traders assess the viability of the bullish breakout, but the RSI is still holding above the mid-line, which means the pair could find further support if it holds above the descending channel."
On the small cap front
The S&P ASX Small Ordinaries shed 0.61% overnight, falling alongside a small drop of 0.07% for the ASX200.
You can read more about the following throughout the day:
- Lithium Energy Ltd (ASX:LEL) upgraded 2.4 million tonnes of the Solaroz Lithium Brine Project’s inferred mineral resource estimate to the indicated category, with the total inferred and indicated resource sitting at 3.3 million tonnes of lithium carbonate equivalent.
- Fenix Resources Ltd (ASX:FEX) has appointed new executives to its board in the form of John Welborn as executive chair and Craig Mitchell as executive director with the aim of expanding the company’s business following recent acquisitions.
- Kingfisher Mining Ltd (ASX:KFM) identified broad lithium anomalies in soil geochemistry work on the Chalby Chalby lithium project in Western Australia, offering up new targets head of a maiden drilling program.
- Imugene Ltd (ASX:IMU, OTC:IUGNF) dosed its first patient in a Phase 1 clinical trial studying onCARlytics CD19 virus technology
- NickelSearch Ltd (ASX:NIS) has kicked off a lithium mapping and sampling program at the Carlingup Project near Ravensthorpe in Western Australia.