This week’s US consumer price index figures showed that goods and services prices are rising more slowly now, at a rate of 0.3% in April, down from 1.2% in March, though the annual rate of inflation is still tracking near its 40-year high, at 8.3%.
The question of whether inflation is levelling off, or is still on the rise, has injected volatility into the markets, with fears the Fed may move even more aggressively on rates to head it off.
The ASX has opened lower following losses on US markets overnight.
ASX futures were down 35 points or 0.5% to 7,010 around 7am this morning on the eastern seaboard.
The news wasn’t bleak everywhere. In Europe, markets climbed. The pan-European STOXX 600 index rose, as did the German Dax (2.2%) and the FTSE in the UK (1.4%).
In Germany, inflation is headed in a familiar direction, tipping an annual rate of 7.4% – its highest since 1981.
Apple falls from the tree
Investor confidence on Wall Street was flat, with a uniform downward trend across US markets. The Nasdaq fell furthest (-3.2%), perhaps reflecting the general sentiment that risky tech stocks are most exposed during times of tightening monetary policy.
To prove the point, miners BHP and Rio Tinto saw modest gains, while there were sell-offs on Apple (-5.2%), Netflix (-6.4%) and Meta (-4.5%) stocks.
In the case of Apple, analysts warned against buying the dip, tipping that there was more pain to come.
Aussie dollar sees a rough month
The Australian dollar, which was trading at around 75 US cents in April, has this week fallen as low as 69.28 US cents. This is a substantial drop in just a month, and could signal more pain for our economy if it doesn’t reverse course soon.
The dollar’s slump may be attributed to slowing Chinese demand for Australian commodities, particularly iron ore, and growing heat in the US economy, where their inflation is outpacing ours.
A weak Aussie dollar means more cost of living and inflationary pressures, and is an extra thing to keep an eye on as the year progresses.
Bitcoin tumbles in US, crypto ETFs come to Australia
Like other risk assets in the current climate, cryptocurrencies continued to slide in the US.
Bitcoin fell to a low of $28,000 before settling at $US29,810 – a 5.7% decline for the day, according to Bitstamp.net.
The digital currency has lost at least a third of its value this year and has dropped by more than half its November 2021 value.
But the news isn’t all bad for cryptocurrencies. Exchange operator Cboe Australia and broker ETF Securities have launched Australia’s first exchange-traded funds (ETFs) dedicated to the two largest cryptocurrencies, Bitcoin and Ethereum.
The ETFs for the two currencies were developed with exchange-traded product specialist 21Shares to capitalise on the growing interest in digital currencies in Australia.
Cboe Australia chief executive Vic Jokovic said the funds will “pave the way for more Australians to expose their portfolios to cryptocurrency in a regulated manner”.
In other news
The Commonwealth Bank delivered a $2.3 billion March quarter profit but warned that it still faced “margin pressure”.
Global oil prices were up by 6% on Wednesday, linked to signs of easing COVID infections in China putting upward pressure on demand.
Brent crude price rose by US$5.05 or 4.9% to US$107.51 a barrel, while US Nymex crude gained US$5.95 or 6% to US$105.71 a barrel.
Base metal prices were buoyant on the whole – zinc rose by 2.1%, copper by 1.3% and aluminium by 0.9%, but nickel fell by 2.1%.
Gold was up, and the iron ore futures price gained US$3.93 or 3% to US$134.20 a tonne.