There is only one way to describe the market at the moment: a rollercoaster ride.
There are less ups and downs on the Superman ride at Movie World, than there are currently in global markets.
Investors hit the sell button in the US overnight as Fed chair Jerome Powell spoke about speeding up tapering measures.
“Mr Powell said the Bank will discuss, note discuss, speeding up the tapering of its quantitative easing program,” Joseph Palmer and Sons director Alex Moffatt said.
Yes, the key word is ‘discuss’, with no firm decisions being made yet. However, that didn’t save Wall St from its losses.
Powell said “… since the last meeting, we've seen basically elevated inflation pressures, we've seen very strong labour market data without any improvement in labour supply, we’ve seen strong spending data too".
He told the Senate Banking Committee that inflation, now running at more than twice the Fed's flexible target of 2%, “is only expected to ease in the second half of 2022”.
What does this mean for the ASX?
ASX futures were down 35 points or 0.5% to 7,196 near 7.30am AEDT.
Australian shares are thus set to open lower, taking their direction from a broad sell-off in New York.
It will also factor in falls in oil and gold as investors repositioned for a faster taper by the US central bank.
Here’s what we saw:
The Aussie dollar fell from highs near US71.70 cents to lows near US70.65 cents and was near US71.30 cents in afternoon US trade.
Global oil prices slumped on Tuesday, with Omicron still weighing on investors’ minds: a more virulent virus may serve to cap travel demand and thus demand for oil.
The Brent crude price fell by US$2.87 or 3.9% to US$70.57 a barrel.
The US Nymex crude price fell by US$3.77 or 5.4% to US$66.18 a barrel.
Base metal prices fell by as much as 1.6% on Tuesday with nickel down the most.
Lead rose by 0.4%.
The gold futures price fell by US$8.70 or 0.5% to US$1,776.50 an ounce.
Spot gold was trading near US$1,772 an ounce at the US close.
Iron ore rose US15 cents or 0.2% to US$100.10 a tonne.
Australian markets
The ASX is set to open lower this morning.
And news flow seems to be slowing down, dominated by Omicron, tapering measures and bits and pieces, rather than any major market moving announcements.
Here’s a few pieces to consider.
Packer’s tech investments pay off
While Crown continues to make cultural changes, lest it loses its licences, major shareholder James Packer has had a win.
Packer’s private company has made a $500 million profit due, in part, to its American technology stock investments.
The move suggests he could transition into technology, if and when, he sells his stake in Crown.
The Australian reports that Packer’s paper fortune surged by about $600 million in 2021, boosted by a rise in the market value of the gaming company.
Consolidated Press Holdings made a net profit of $530 million in the year to June, with Packer paid a $111 million dividend.
Mr Yum hungry to innovate
Mr Yum has raised $89 million in its Series A funding round.
The digital menu hospitality provider claims the raise is largest Australian Series A for a female-led company.
It is also says it is the third-largest Series A in Australian history.
Mr Yum provides digital menus at restaurants, bars and cafes via a QR code. The money will be put toward growth initiatives.
"It will allow us to triple down on our global lead on product innovation, to invest in our growing team around the world and continue to provide the best customer service to our hospitality and entertainment venue partners," Mr Yum says.
High profile investors including Skip Capital (the private fund of Atlassian (NASDAQ:TEAM) co-founder Scott Farquhar and Kim Jackson), Tennis Australia’s Wildcard Ventures, Broadsheet founder Nick Shelton and Kogan founder Ruslan Kogan, all participated.
Mr Yum's Post-Seed round in April 2021 delivered more than $100 million.
Tracking the trolls
The technology industry could be in for a major shake up with the Federal Government’s war on trolls creating all sorts of debate.
Prime Minister Scott Morrison said on Sunday, “The rules that exist in the real world must exist in the digital and online world. The online world shouldn’t be a wild west, where bots and bigots and trolls and others can anonymously go around and harm people and hurt people.”
On Wednesday, the PM announced a wide-ranging parliamentary inquiry that will forensically examine the dangers of Big Tech.
Troll Hunting author Ginger Gorman says the legislation doesn’t go far enough.
“Overall I’d say this is far too little too late – so much real harm has already been done. And this doesn’t go far enough. The government must legislate a duty of care so the public has to be kept safe by the platform. They are continually publishing egregious content and have no accountability for this.”
In Germany, platforms can be fined up to €50 million for not deleting posts containing racist, defamatory or illegal speech within 24 hours.
“Media companies have shown over many decades that they will not fix this on their own. So governments need to legislate to break them up, cut up their power and enforce a public duty of care,” Gorman said.
Reset Australia executive director Chris Cooper has different concerns.
“Anonymity is an important tenet of a free and open internet that protects critics of the powerful, which can hold leaders accountable.”
Fear is that sexual abuse survivors or whistleblowers will have a legitimate platform for their concerns removed.
Opposition treasury spokesman Jim Chalmers says it’s the details that count, although the battle is a "really important objective”.
Hearings will begin in December.
Australian indices (at time of writing)
- ASX 200 fell 0.15% to 7,244.80.
- ASX24 futures fell 0.5% to 7,196.
- S&P/ASX Small Ordinaries fell 0.61% to 3,468.00.
- All Ordinaries fell 0.16% to 7,569.20.
US markets
We know they took a dive yesterday and it was mostly down to Jerome Powell.
“For months now the US money market has been awash with money, evidenced by the staggering magnitude of the Fed’s reverse repurchase agreements. So, it was London to a brick that the Fed may have noticed it and thought to wind back some of the excess,” Moffat says.
“The Fed has also been splendid in telegraphing their thinking and intentions, so why mention of this discussion at the next meeting, which I am sure has been on the agenda at recent past meetings, would cause such a market response is unfathomable.
“Actually, it is understandable. A lot of trading these days is based on algorithms and so the mere mention of speeding up the taper would have caused valves to overheat in the trading programs.”
Powell was hawkish, conceding that high inflation – which Fed officials believes to be ‘transitory’ – would last until mid 2022.
"The economy is very strong and inflationary pressures are high, and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases, which we actually announced at the November meeting, perhaps a few months sooner," Powell said.
"The threat of persistent higher inflation has grown, my baseline is still that it will move back down over the course of next year closer to target, but clearly the risk of more persistent inflation has risen.”
Powell also noted the effect of Omicron.
"The recent rise in COVID-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation," Powell said.
The chair said Omicron could push up inflation if it intensified supply chain disruptions.
Finally, Moderna said that vaccines were unlikely to be as effective against Omicron as they are against Delta. This caused shares in Moderna to fall by 4.4%
US indices
- Dow Jones fell 1.9% to 34,483.72.
- S&P 500 fell 1.9% to 4,567.
- Nasdaq fell 1.6% to 15,537.69.
European markets
Powell’s comments also had an effect in Europe.
Travel & leisure shares fell 2.8% on worries about the efficacy of existing vaccines against the Omicron variant.
However, material stocks rose by 0.1%.
In London trade, shares in Rio Tinto fell 0.2%; BHP shares rose 2.4%
Meanwhile, UK regulators have ordered Meta to sell social-media animated company Giphy.
Regulators believe the acquisition would hurt both users and advertisers.
"We have decided that the only effective way to address the competition issues that we have identified is for Facebook to sell Giphy, in its entirety, to a suitable buyer,” the Competition & Markets Authority (CMA) said in a release.
The independent CMA panel fears Facebook could increase its market power by "denying or limiting" other platforms' access to Giphy GIFs.
This would ultimately drive even more traffic to Facebook-owned sites including Facebook, WhatsApp and Instagram, which account for 73% of social media user time.
European indices
- STOXX 600 fell 0.92% to 462.96.
- German Dax fell 1.2% to 15,100.13.
- UK FTSE fell 0.7% to 7,059.45.