Wall St was mixed yesterday and the ASX will resume trading today with volatility the word for the day after a $59 billion bloodbath on Tuesday.
US stocks were mostly lower as the US Federal Reserve said a rate rise was now close.
The US sharemarket had been trading higher before Fed Chair Jerome Powell's press conference, before faltering during the announcement and then rallying towards the end of the session.
By day’s end, the Dow Jones index was down by 130 points or 0.4% after being up 518 points in early trade and down 421 points after the Fed decision. The S&P 500 index fell by 0.2%, while the Nasdaq rose by 2.8 points or less than 0.1%.
Here’s what we saw (source Commsec):
- The Aussie dollar fell from US71.76 cents to US70.97 cents and was near US71.15 cents in late US trade.
- Global oil prices rose 2% to 7-year highs on Wednesday. Investors cited tight global oil supplies and Ukraine-Russian political tensions as factors supporting prices. OPEC+ oil producers meet on February 2. Producers in the group are having trouble meeting production targets.
- The Brent crude price rose by US$1.76 or 2.0% to US$89.96 a barrel.
- The US Nymex crude price rose by US$1.75 or 2.0% to US$87.35 a barrel.
- Base metal prices rose by as much as 2.1% on Wednesday with tin and nickel doing the best. But lead fell by 0.7%.
- The gold futures price fell by US$22.80 or 1.2% to US$1,829.70 an ounce.
- Spot gold was trading near US$1,817 an ounce in late US close.
- Iron ore rose by US25 cents or 0.2% to US$138.10 a tonne.
Australian market
BHP approved for unification
BHP has been approved by the UK court to unify.
The scheme becomes effective at 9pm GMT time on Friday, with unification should be finalised by January 31.
BHP Plc shares and Plc ADSs will be changed for BHP Limited shares and ADSs on a one for one basis and BHP Group Limited will become the sole parent company of the BHP Group.
The court decision follows an overwhelmingly positive vote for the change by Australian and British shareholders.
BHP will become the biggest single listed entity of the ASX.
Cash rate could hit 3%
ANZ's head of Australian economics, David Plank believes the RBA could raise the cash rate to over 3% by 2025 and says RBA notes point to the neutral rate being higher than the market is pricing.
He says a flat Phillips curve means higher inflation could be "sticky", even when interest rates rise, noting that household debt constrainst may not be as severe as first thought.
In fact, higher wages growth should ease the pressure on household debts.
Of course, global developments "pose the biggest risk to this view", Planks says. Especially as Fed hikes could "materially impact" asset prices and certain emerging markets could reassess how high interest rates can go.
"We expect this to happen on occasion in the year ahead, with 2022 shaping up as a volatile year for financial markets," Plank said.
US market
The US Federal Reserve is likely to lift interest rates in March, with Fed Chair Jerome Powell citing jobs recovery which won’t be held back by tighter monetary policy.
Powell said decisions will not be made based on the recent fluctuations in US sharemarkets, which have recorded corrections in major indices.
“I think there’s quite a bit of room to raise interest rates without threatening the labor market,” he said.
“The economy is in a very different place to when we began raising rates in 2015: it’s much stronger, labour market far stronger, inflation higher, these differences are likely to have important implications for appropriate pace of policy adjustments.”
Meanwhile, Microsoft jumped 2.9% after it released better-than-expected results on robust demand for digital software.
Boeing lost 4.8% after it reported a sizeable fourth-quarter loss as costs climb in its 787 production, which offset a comeback of the 737 Max.
Shares in Texas Instruments were up 2.5%.
European market
European markets were higher yesterday as the markets recorded their best sessions since early December.
Gains were broad-based with oil & gas up 4%, travel up 3.4%, miners up 2.6% and technology up by 2.2%.
The pan-European STOXX 600 index rose by 1.7%. The German Dax index rose by 2.2%.
The UK FTSE index lifted by 1.3%.
In London trade, shares in Rio Tinto rose by 2.3%. Shares in BHP gained 3.0%.