Rebounding global markets should see the ASX start higher today.
Gold miners will be hoping to continue their good run. They were some of the biggest gainers, up 6.7% to $1.35.
While Wall Street stocks were mixed and tech shares had another bad day losing 2.4% for the session, investors continue to reassess equity bets in anticipation of interest rate rises.
“It’s just a case of seeing interest rates are moving up and you’re seeing some of the air come out of high multiple stocks,” said Briefing.com analyst Patrick O’Hare.
Here’s what we know:
- The Aussie dollar fell from highs near US72.60 cents to lows near US71.70 cents and was near the lows at the US close.
- Global oil prices fell by 0.6% on Wednesday. Reuters reported that "US crude stockpiles rose by 4.6 million barrels last week, exceeding expectations, boosted by a rebound in output as offshore facilities shut in by two US Gulf hurricanes resumed activity."
- The Brent crude price fell by US45 cents or 0.6% to US$78.64 a barrel.
- Base metal prices fell by between 0.7-1.6% on Wednesday with tin down the least and lead down the most.
- The gold futures price fell by US$14.60 an ounce or 0.8% to U$1,722.90 an ounce.
- Spot gold was trading near US$1,725 an ounce at the US close. Iron ore rose by US$2.45 a tonne or 2.2% to US$114.80 a tonne.
Australian markets
The Australian stock market closed 1.1% lower to 7,196.7 at 4:15pm yesterday but is expected to reverse the trend this morning.
The ASX has worries beyond trading. Its operations are under fire.
The Reserve Bank has handed down a critical review of governance arrangements at the ASX clearing and settlement facilities, saying there are unclear lines of accountability and gaps in its access to skills.
We’ll see how that plays out with the ASX in the coming weeks and months.
On the good news front, gold miners are said to be benefitting from lower iron ore prices, as the slump, according to Macquarie Equities could help ease a labour shortage in the industry.
The benchmark iron ore price has more than halved from a record high in May. However, spot iron ore did rise 2.2% to $US114.80 a tonne on Wednesday after hitting $US94 last week.
"While our bulk resources analysts expect most iron ore miners will continue to operate at these price levels, there is a possibility that some smaller mines will see a curtailment or pause in production," Macquarie analysts say.
"This, in our view, could see some labour supply flow back into other sectors of the mining industry, such as gold, that are currently experiencing a Covid-19 related skills shortages."
Australian indices
- ASX 200 rose 0.10% to 7,204.10.
- ASX24 futures rose 0.3% to 7,198.
- S&P/ASX Small Ordinaries rose 0.14% to 3,435.80.
- All Ordinaries rose 0.15% to 7,511.40.
US markets
According to Commsec’s Craig James, investors watched attempts by Congress to avoid a government shutdown and suspend or raise the debt ceiling.
Also, US Federal Reserve chair Jerome Powell referred to "tension" between high inflation and a higher-than desired level of unemployment
What does all this talk about debt ceilings actually mean and why is it dampening the mood?
Swissquote senior analyst Ipek Ozkardeskaya said, “On Monday, Republicans blocked a bill that would push back the debt ceiling to December and avoid a government shutdown by October 1st. The first time I heard about the debt ceiling discussion, years ago, I thought it was a big deal, but it’s not, as the Congress raised the debt ceiling a dozen times in the past two decades.
“However, this time, Democrats are also trying to simultaneously pass a US$4 trillion spending bill. It’s complicated, but the debt ceiling will certainly be raised as no politician on both sides of the table wants to see the US default on its obligations by mid-October.
“So, I am not much worried about that. I mean, it also happened that the US politicians couldn’t agree on raising the debt ceiling, which resulted in US government being shut for weeks, but at the end of the day, an agreement is always sealed.
“Obviously, the political deadlock in the US will likely continue exercising some more downside pressure on the US stock markets. The S&P500 is again testing its 100-dma to the downside, which could be an interesting buy level for those expecting an imminent relief in the US stock markets with an eventual deal between the US policymakers for raising the debt ceiling.”
Ozkardeskaya is also expecting the energy crunch to wane.
Energy crunch should also wane
“Wherever we turn our heads we see problems regarding energy supply. We talk about the Chinese supply shortages, which are mostly driven by government asking many provinces to curb activity or shut down factories to meet Beijing’s green goals. That’s partly understandable but bad for the market mood.
“Elsewhere, supply chain disruptions and a slower-than-needed rise in alternative energy production that fails to keep up with the pace of the post-pandemic recovery in activity, are also weighing on the global energy production and pressuring energy prices higher.
“Most factors that push oil prices higher are short-term issues. The UK will hire more truck drivers and even mobilise the army to get oil in stations and end the chaos. This comes after we saw long queues in front of British gas stations to buy fuel for their vehicle as there are not enough truck drivers to drive oil to the gas stations. Apparently, many truck drivers weren’t British and had to leave the country following Brexit.
“OPEC+ output reportedly fell by 150,000 barrels per day versus the 400,000-barrel increase planned by the cartel. That decline is due to maintenance work in Kazakhstan and unplanned supply disruptions in Nigeria, Mexico and Libya. Add to that the pressure on US oil reserves due to Hurricane Ida and you have a nice squeeze in global oil supply.
“However, OPEC exports rebounded in September as the group is planning to add more supply in the coming months, and Hurricane Ida’s impact on US oil reserves should slowly fade.
“The latest API data showed an unexpected 4.1-million-barrel rise in US oil reserves last week, and today’s more official EIA data should also surprise after seven straight weeks of decline in US oil inventories. If that’s the case, we shall see a further downside correction in oil prices from the actual levels, but the market could easily find support near the $72 per barrel before making sure that the supply issues are fully resolved.”
US indices
- Dow Jones rose 0.3% to 34,390.72.
- S&P 500 rose 0.2% to 4,359.46.
- Nasdaq fell 0.2% to 14,512.44.
European markets
European exchanges rebounded on Wednesday helped by takeover action.
Reuters reported that "British drugmaker AstraZeneca jumped 4.2% after saying it will take full control of Caelum Biosciences in a deal worth up to $500 million."
Oil & gas stocks rose 0.9% while technology fell 0.7%.
In London trade, shares in Rio Tinto rose by 0.9% and shares in BHP rose by 0.8%.
European indices
- STOXX 600 rose 0.59% to 455.03.
- German Dax rose 0.8% to 15,365.27.
- UK FTSE rose 1.1% to 7,108.16.