The Australian sharemarket is set to open lower on Thursday, with futures pointing to a decline of 61 points, or 0.7%, following heavy losses on Wall Street and a sharp rebound in global oil prices.
Investors will also assess June building approvals and remarks from Reserve Bank of Australia assistant governor Sarah Hunter, while quarterly updates are due from Boss Energy, PLS Group, Perseus Mining, Strike Energy, Vulcan Energy and Champion Iron.
ASX rallies as softer inflation reduces rate hike risk
The S&P/ASX 200 gained 90.8 points, or 1%, to close at 9,038.6 on Wednesday after inflation data sharply reduced expectations of an interest rate rise at the RBA’s August meeting.
Annual headline inflation eased to 3.8% in June, well below the RBA’s 4.8% forecast, while underlying inflation held at 3.6%, undershooting both economists’ expectations and the central bank’s estimate.
Traders cut the probability of another rate increase this year to around 50%, from more than 90% before the data.
Consumer and technology stocks led the rally. JB Hi-Fi climbed 4.7%, Harvey Norman gained 4.1%, Xero rose 4.1% and Technology One advanced 3.4%.
CSL surged 7.2% after confirming plans for clinical trials to support regulatory approval of its higher-yield immunoglobulin manufacturing technology.
Rio Tinto added 3.7% after reporting first-half underlying profit of US$6.85 billion, up 43% from a year earlier and ahead of market expectations. BHP rose 1.4% and Fortescue gained 2%.
Wall Street drops after hawkish Fed hold
US sharemarkets fell sharply after the Federal Reserve left interest rates unchanged but indicated growing support among policymakers for further tightening as officials assessed the inflationary impact of the Iran conflict.
The Fed voted 9-3 to maintain its benchmark rate at 3.50%-3.75%, with markets now pricing in around a 60% chance of a September increase.
The Dow Jones fell 2.2%, the S&P 500 dropped 1.5% and the Nasdaq declined 1.7%.
Semiconductor stocks were among the weakest performers, with the Philadelphia Semiconductor Index sliding 5.3% to its lowest level since early May. Microsoft fell 0.7% and Meta Platforms declined 1.3% ahead of their quarterly results.
Ford Motor gained 2% after lifting its annual profit outlook, while Lennox International plunged almost 21% after reducing its forecast.
US Treasury yields moved higher at the long end of the curve, with the 10-year yield rising nine basis points to 4.69%. The two-year yield eased two basis points to 4.26%.
European markets mostly lower
European sharemarkets finished mostly weaker as mixed luxury-sector earnings weighed on sentiment.
The FTSEurofirst 300 declined 0.4%, although the UK’s FTSE 100 gained 0.3%.
Kering surged almost 17%, its biggest one-day rise since 2002, after Gucci’s second-quarter sales fell by less than expected. Hermes dropped 11% after reporting limited signs of a recovery in China.
Technology stocks declined 0.4%, while ASM International fell 4.8% despite issuing an upbeat forecast. Glencore gained 2.8% after reporting a 15% increase in first-half copper production.
Currencies mixed after Fed decision
Currency markets were mixed against the US dollar following the Fed’s decision.
- The euro gained 0.7% to US$1.1464.
- The Japanese yen strengthened 0.2% to ¥163.48.
- The Australian dollar slipped 0.4% to US69.48 cents, extending losses recorded after the softer domestic inflation figures.
Oil surges as Middle East strikes resume
Global oil prices jumped as military strikes resumed in the Middle East and US President Donald Trump flagged further action against Iran.
- Brent crude futures settled 7.9% higher at US$90.74 a barrel, rebounding from steep losses earlier in the week.
Base metals were weaker.
- Copper futures fell 0.8% amid signs that supply tightness was easing in China.
- Aluminium declined 1% as investors took profits following recent gains.
- Gold futures edged 0.1% lower to US$4,036 an ounce, while iron ore futures were unchanged at US$98.27 a tonne.
Looking ahead
In Australia, attention will turn to June building approvals and comments from RBA assistant governor Sarah Hunter.
In the US, Apple, Amazon and Mastercard are due to report quarterly results. Economic releases include advance GDP, the PCE price index and weekly jobless claims.