Australian shares are expected to open lower today after Wall Street’s relief rally lost momentum ahead of new Federal Reserve chairman Kevin Warsh’s first interest rates decision.
ASX 200 futures were down 21 points, or 0.24%, to 8,904, pointing to a softer start for the local market.
Markets expect the Federal Reserve to leave rates unchanged at its meeting this week, while closer to home traders are increasingly pricing in a rate cut from the Reserve Bank of Australia after governor Michele Bullock held the cash rate steady on Wednesday.
Oil prices fell to a 3-month low, slipping below US$80 a barrel, after Morgan Stanley (NYSE:MS) and Goldman Sachs both cut their price outlooks for coming quarters. Goldman Sachs now expects Persian Gulf exports to return to pre-war levels by the end of July, 1 month earlier than previously forecast.
Gold edged higher, while iron ore was little changed.
ASX closes at 2-month high after RBA holds
The Australian sharemarket recovered from early losses on Tuesday after the RBA kept interest rates on hold at 4.35% in a unanimous decision.
The S&P/ASX 200 Index finished up 3.7 points at a 2-month high of 8,917.70, after falling to an intraday low of 8,834. Five of the 11 sectors closed higher.
Bullock said the board’s decision to keep rates unchanged did “not rule out” further increases if required to bring inflation back to target.
“We still think that there are risks to the upside,” she said after the meeting.
Bond yields eased modestly and the Australian dollar was steady around US70.54 cents after the decision. The rate-sensitive 3-year yield lost 1 basis point, while the 10-year yield also dipped by 1 point.
Bell Potter’s Richard Coppleson said the market had been waiting for Bullock’s 3.30pm speech.
“She did not mince her words – they will hike if they have to,” he said in a note to clients.
Westpac chief economist Luci Ellis maintained her forecast that further tightening was likely.
“If we are right that the June quarter result for trimmed mean inflation will again be strong, the next hike will come at the August meeting,” Ellis said.
Energy stocks rose despite lower crude prices, with investors bargain hunting in the sector. Woodside Energy advanced 2% to $30.04 and Santos added 0.8% to $7.45.
Financials also finished higher. Commonwealth Bank edged up 0.1% to $161.88, National Australia Bank rose 1.2% to $37.89, Westpac gained 1.2% to $35.75 and ANZ added 0.9% to $34.81.
Rate-sensitive retail and technology stocks were among the weakest performers. Wesfarmers fell 1.1% to $85.26, JB Hi-Fi eased 0.3% to $78.25, WiseTech Global dropped 4.2% to $36.79 and TechnologyOne declined 2% to $30.76.
BHP gained 1 cent to close at a fresh record of $65.19 in a mixed session for miners, with gold stocks stronger while base metals-exposed names, including aluminium producers, weakened.
Wall Street mixed as chip stocks retreat
US markets were mixed on Tuesday as investors rotated out of chipmakers and into cyclical stocks, supported by falling oil prices.
The Dow Jones Industrial Average rose 328.64 points, or 0.64%, to a record close of 51,999.67, after touching an all-time intraday high of 52,190.29.
The S&P 500 fell 0.57% to 7,511.35, while the Nasdaq Composite lost 1.15% to 26,376.34.
Chip stocks weighed on the technology-heavy Nasdaq. Advanced Micro Devices dropped more than 7%, Broadcom fell 4%, Micron Technology shed 6% and Nvidia lost more than 2%.
Financials were the strongest-performing S&P 500 sector, with JPMorgan Chase up 3.6% and Bank of America gaining 1.7%. Caterpillar also helped lead industrials higher, rising more than 1%.
Investors bet that lower energy prices could support a re-acceleration in the US economy.
SpaceX (NASDAQ:SPCX) continued to attract attention on its third day of trading, rising almost 5% and extending its post-IPO surge to nearly 50%. The Elon Musk-led rocket company briefly surpassed Microsoft and Amazon in market value during the session, after its valuation pushed above US$2.7 trillion.
The company priced its initial public offering at US$135 and closed Tuesday at US$201.80.
Among other movers, Yum Brands rose 2% after the fast-food group said it would sell its Pizza Hut chain for US$2.7 billion.
US government bond yields moved lower after mixed economic data. Import prices rose 1.9% in May, above forecasts, while housing starts fell 15.4%, the largest decline since March 2024.
The US 10-year Treasury yield fell 3 points to 4.44%, while the 2-year yield slipped 1 point to 4.05%.
European markets extend gains
European sharemarkets edged higher, extending the previous session’s rally after a preliminary agreement between the US and Iran raised hopes of an end to the conflict.
Sectors leveraged to economic certainty performed well. Industrial goods and services advanced 1.1%, while banks rose 1.7% to lead broader gains.
The continent-wide FTSEurofirst 300 Index ended 0.3% higher and the UK’s FTSE 100 gained 0.6%.
Among corporate updates, UniCredit rose 4.2% after Germany rejected the Italian lender’s offer to buy Commerzbank shares.
Concerns about technology companies’ growing reliance on debt funding resurfaced, with STMicroelectronics (NYSE:STM) falling 4.1% after announcing plans to issue US$1.5 billion in convertible bonds.
Currencies mixed against US dollar
Currencies were mixed against the US dollar.
- The euro was 0.2% higher at US$1.1606.
- The Japanese yen slipped 0.1% to JPY160.48.
- The Australian dollar edged lower to US70.64 cents.
Oil falls below US$80, gold edges higher
Global oil prices fell to a 3-month low as traders hoped the US and Iran would agree to end the war and keep oil flowing through the Strait of Hormuz.
Brent crude futures settled 5.1% lower at US$78.96 a barrel, while US West Texas Intermediate crude declined 5.82% to US$76.05 a barrel. It was the first close below US$80 for both benchmarks since early March.
Base metals were steady.
- Copper futures rose 0.1%, while aluminium futures slipped 0.1% to a 2-and-a-half-month low as supply concerns eased.
- Gold futures were little changed, rising 0.1% to US$4,354 an ounce.
- Iron ore futures were also little changed, down 0.3% to US$101.66 a tonne.
Looking ahead
In Australia, the Melbourne Institute Leading Index is due for release, while RBA Assistant Governor Brad Jones is scheduled to speak at a banking conference in Melbourne.
In the US, the Federal Reserve will hand down its interest rates decision, with markets expecting rates to remain on hold.