The ASX dipped this morning in early trade, with ASX Futures (SPI 200) implying the ASX 200 would open 39 points lower, down -0.57%.
There is weakness in the markets all round ahead of tomorrow’s US inflation print and the recent rally could soon be a distant memory.
Overnight 60% of US stocks declined, while only four of eleven US sectors advanced. It was the fourth straight day US stocks have finished lower.
Chip makers aren’t helping as there was a large sell-off in semi-conductor stocks which drove old NASDAQ down.
The Dow Jones Industrial Average DJIA closed 58.13 points, or 0.2%, lower at 32,774.41. The S&P 500 SPX fell 17.59 points, or 0.4%, to end at 4,122.47. The Nasdaq Composite COMP shed 150.53 points, or 1.2%, closing at 12,493.93, its third straight day in the red.
Semiconductor stalwarts Nvidia Corp and Micron Technology Inc. had warned that things weren’t to par. Nvidia has badly underperformed the S&P 500 Index.
President Joseph Biden’s bipartisan Chips and Science Act, which was recently signed into law, doesn’t seem to have had an impact on the sector, which is really all due to inflation fears.
“There’s a lot of nervousness around the inflation reports coming out tomorrow and Thursday,” Kingsview Investment Management portfolio manager Paul Nolte said. “And continued weakness in the chips sector, which has historically been seen as a market-leading sector, is also helping to hold stocks back.”
The pending release of CPI figures will be interesting.
“A hotter-than-anticipated CPI report will pressure markets this week. An in-line report could be taken in stride as investors have priced in a 75-basis point move by the Fed in September,” Ally chief markets and money strategist Lindsey Bell said.
“Either way, we still have to get through another jobs report, more inflation data, and Jackson Hole before we get to the Fed’s September meeting,” Bell said in emailed comments to MarketWatch, referring to the annual central banker retreat in Wyoming later this month. “It could be a volatile several weeks ahead.”
The inflation data is expected to show monthly inflation slowing from June, however the annual pace is expected to remain near 40-year highs.
"There is a real concern about what numbers we can get on the inflation tomorrow, Thursday and even Friday with the consumer sentiment numbers,” Ventura Wealth Management’s Tom Cahill said.
"There are a lot of things to look at between now and the end of the week and a lot of profit has been made over the past couple of weeks so I think there is a bit of profit taking going on,” he said.
Here’s what we saw (source Commsec):
- The Euro fell from highs near US$1.0245 to around US$1.0200 and was near US$1.0210 at the US close.
- The Aussie dollar fell from near US69.93 cents to US69.50 cents and was near US69.60 cents at the US close.
- The Japanese yen eased from near 134.72 yen per US dollar to JPY135.20 and was near JPY135.10 at the US close.
- Global oil prices eased by around 0.4%. Reuters reported that oil "prices were pressured by talks of a last-ditch effort by European nations to revive the Iran nuclear accord. On Monday, the European Union put forward a 'final' text to revive the 2015 Iran deal."
- The Brent crude price lost US34 cents or 0.4% to US$96.31 a barrel.
- The US Nymex crude price fell by US26 cents or 0.3% to US$90.50 a barrel.
- Base metal prices were mixed on Tuesday. Copper, lead and nickel fell by as much as 0.6%. Other metals rose by as much as 3.1% with zinc up the most.
- The gold futures price rose by US$7.10 an ounce or 0.4% to US$1,812.30 an ounce. Spot gold was trading near US$1,795 an ounce at the US close.
- The iron ore futures fell by US$1.67 or 1.5% to US$109.28 a tonne.
Australian markets
CBA is optimistic about the economy
Commonwealth Bank of Australia (ASX:CBA) CEO Matt Comyn, who just pocketed $6.96 million in annual salary, is optimistic about where the economy is heading.
His optimism comes as the banking giant saw its cash profit climb 11% to almost $9.6 billion in the 12 months ended June 30. This exceeded analyst estimates of $9.4 billion.
While its net interest margins fell 1.9%, the bank expects margins to rise as the Reserve Bank of Australia’s interest rate hikes temper inflation and boost the bank’s profitability.
On the economy Comyn said, "It is a challenging time, but we remain optimistic that a path can be found to navigate through these economic conditions.
"We remain of the view that the medium-term outlook for Australia is a positive one."
As for Comyn, his total remuneration jumped 35% from FY21.
European markets
Also took a hit for the same reasons as anywhere else: investors waiting for key US inflation data.
Technology shares fell most, down 3.3%. Autos lost 2.2% and miners fell 0.5%. Banks rose 0.1%. Companies generally lost ground after releasing earnings results with Germany's Continental down 6.5%.
The pan-European STOXX 600 index fell by 0.7%. The German Dax index lost 1.1%. But the UK FTSE index rose by 0.1%. In London trade, shares of Rio Tinto rose by 0.6% but BHP shares fell by 0.8%.