A global rally overnight should give the ASX a boost today.
Stocks on Wall St took big swings but were sharply higher as investors took account of the Federal Reserve's highly anticipated quarter-point rate hike and the series of increases to come over the rest of the year.
To highlight the swings, the Dow Jones Industrial Average dipped into negative territory after the Fed announcement, yet roared back to be 1.5% higher by the closing bell finishing up 519 points near 34,063. The S&P 500 jumped 2.2% to close near 4,358, while the Nasdaq Composite gained 3.8% to close near 13,437.
While the markets are rising, the oil price continues to fall, with crude oil down 1.5% to $US95.01 as Libya urged OPEC to quickly raise supplies.
There have been moderate falls in price at the pump, however, it is unlikely we will see any significant change for another two weeks.
That said, the outlook isn’t so great.
According to the International Energy Agency (IEA), the world is facing its biggest oil supply "shock" in decades due to the sanctions being imposed on Russia.
The IEA has lowered its forecast for international oil demand for 2022, citing surging commodity prices and sanctions on Russia which could "appreciably depress global economic growth".
"Faced with what could turn into the biggest supply crisis in decades, global energy markets are at a crossroads," the IEA says in a monthly report.
"While it is still too early to know how events will unfold, the crisis may result in lasting changes to energy markets."
The United States and Britain have placed bans on Russian oil imports.
"The implications of a potential loss of Russian oil exports to global markets cannot be understated," the IEA says.
Here’s what we saw (source Commsec):
- The Euro rose from lows near US$1.0950 to highs near US$1.1044 and was near US$1.1035 at the US close.
- The Aussie dollar rose from lows near US72.02 cents to highs near US72.96 cents and was near US72.85 cents at the US close. But the Japanese yen fell from near 118.18 yen per US dollar to JPY119.05 and was near JPY118.65 at the US close.
- US crude inventories rose by 4.35 million barrels last week, against market expectations for a 1.375 million drop.
- The Brent crude price fell by US$1.89 a barrel or 1.9% to US$98.02 a barrel.
- The US Nymex crude price lost US$1.40 or 1.5% to US$95.04 a barrel.
- Base metal prices were mixed. Copper rose by 2% on hopes for more policy stimulus in China. Nickel slid 5% to its lower limit after trading had been suspended for a week.
- The gold futures price fell by US$20.50 or 1.1% to US$1,909.20 an ounce.
- Spot gold was trading near US$1,926 an ounce at the US close.
- Iron ore jumped US$9.90 or 7.3% to US$145.45 a tonne after China promised stronger policy measures to support the economy.
Australian market
Official February unemployment data will be released by the Australian Bureau of Statistics at 11.30am this morning.
Figures are expected to show a fall in the jobless rate to 4.1%, according to a Bloomberg survey of economists.
Economists predict an additional 37,000 jobs in February and a climb in participation rate to 66.3% in the ABS numbers to come.
More on that later.
US markets
The S&P 500 bank index rose by 3.7%. Megacap tech shares lifted with Tesla 4.8% higher, Amazon gaining 3.9% and Apple up 2.9%.
The US Federal Reserve has flagged interest rates will increase to between 1.75% and 2% by the end of the year.
Fed Chairman Jerome Powell said the US economy was strong and to expect further growth in employment. He said inflation would peak in the second half of this year as supply chain problems played out.
“Inflation is likely to take longer to return to our price stability goals than previously expected.
“But, in my view, the probability of a recession within the next year is not particularly elevated. And why do I say that? Aggregate demand is currently strong and most forecasters expect it to remain so,” he said.
Inflation is expected to remain above the Fed’s 2% target, at 4.1% this year, but will ease to 2.3% in 2024.
Unemployment is expected to drop to 3.5% from 3.8%, while economic growth has been downgraded to 2.8% from 4.1%.
Some analysts aren’t buying the numbers, with Kathy Jones, chief fixed income strategist at Charles Schwab (NYSE:SCHW), saying the Fed’s projections were “a bundle of contradictions”.
“Raise rates a bunch, bring inflation down but GDP growth and unemployment are steady. Hmmm,” she wrote.
Commonwealth Bank analysts have used the R word.
“High inflation expectations can embed high inflation outcomes. The 1980s showed it was very costly to return inflation back to target when inflation expectations are high because more policy tightening may be required. More policy tightening raises the risk of recession,” CBA economists said.
European markets
Closed yesterday amid renewed optimism of progress in talks between Russia and Ukraine.
The pan-European STOXX 600 index rose by 3.1%.
Technology stocks jumped 6.5%.
The German Dax index lifted by 3.8% and the UK FTSE index added 1.6%.
In London trade, shares in Rio Tinto rose by 4% and BHP shares gained 2.6%.