- The ASX 200 is headed for a weaker start on Friday, after snapping its 4-day winning streak on Thursday.
- The US dollar rose sharply on Thursday, gaining 0.53%, to 91.892, its highest level since mid-April.
- Gold shed more than 2%, participating in a sell-off across precious metals.
On Thursday, the Australian benchmark index broke its 4-day winning streak, ending the session with a loss of 27.2 points or 0.37%. Today, Australian shares might continue to witness selling pressure as the ASX 200 is headed for a weaker start on Friday. The energy and gold shares are expected to drag the market on weak commodity prices after the US Federal Reserve indicated a sooner-than-expected tightening in its monetary policy.
Image Source: Copyright © 2021 Kalkine Media
Wall Street closed lower on Thursday, and European shares fell for the first time in two weeks as the US Federal Reserve signalled a hawkish stance, despite US technology shares notched decent gains.
The Dow Jones fell 0.62%, to 33,823.45, while the S&P 500 lost 0.04%, to 4,221.86. However, the tech-heavy NASDAQ Composite closed 0.87% up, to 14,161.36, as market participants bet the economic recovery would boost demand.
On Wednesday, the US Fed signalled it would now be considering whether to taper its US$120 billion-a-month asset purchase program and downgraded the risk from the pandemic given the progress with vaccination drive.
Image Source: © Marianvejcik | Megapixl.com
The US dollar rose sharply on Thursday, a day after the surprise move this week from the US Fed to raise interest rates at a much faster pace than expected. The dollar index was up 0.53% at 91.892, its highest level since mid-April. On Wednesday, the US dollar index rose 1%, its largest daily percentage gain since March 2020.
The Australian and the New Zealand dollars struggled to bounce back on Thursday as surprisingly strong domestic data softened only a little of the blow from a hawkish stance in US monetary policy.
The Aussie fell 0.78% to $0.7547, while the New Zealand dollar also continued its fall and closed the session 0.64% lower, at $0.7002.
The long-dated yields also tumbled on Thursday, flattening the yield curve as some investors appeared to have been caught off-guard by the US Federal Reserve’s statement that it is in no hurry to pare bond purchases and expects to raise interest rates in 2023. The benchmark 10-year yields were last quoted at 1.511%, after reaching a high of 1.594% on Wednesday.
Image Source: © Aoutphoto | Megapixl.com
In the cryptocurrency market, Bitcoin fell for the third straight session and was down 1.85% to US$37,640, as of 9:25 PM GMT. The second-largest cryptocurrency, Ether, was also down 1.02%, while another popular cryptocurrency, Dogecoin, was down 0.57%.
Technology shares to roar
Despite a weak session on Wall Street on Thursday, the tech-heavy NASDAQ 100 closed the session not just in green but also at an all-time high. The conviction in the strength of the economic recovery pushed market participants into US technology stocks. Taking cues from this, the Australian technology shares could also attract investors in today’s session.
Crude oil prices eased
On Thursday, crude oil prices toppled from their highest levels in years, pressured by the US dollar's gain. This is because stronger dollar makes crude oil more expensive to holders of other currencies.
Image Source: © Pichitbo | Megapixl.com
Gold prices tumbled
On Thursday, gold shed more than 2%, participating in a sell-off across precious metals, with palladium losing a massive 11.1%, its worst day in over a year. The sell-off was triggered as the dollar gained ground after the US Federal Reserve struck a hawkish tone on monetary strategy.
Image Source: © Anchesdd | Megapixl.com
Spot gold fell 2% to US$1,776.10 an ounce by 1:44 PM EDT, having earlier touched its lowest level since 3 May, of US$1,766.29.
Australian gold shares could mimic the fall in gold, and miners such as St Barbara Limited (ASX:SBM), De Grey Mining Limited (ASX:DEG) and Northern Star Resources Limited (ASX:NST) could spoil the mood of investors.
On Thursday, prices of steelmaking raw materials in China rose, supported by data revealing a record monthly crude steel output. As a result, the most actively traded iron ore futures for September month delivery increased by 1.0% to 1,224 yuan (US$190.31) a tonne at close.
Copper prices fell to their lowest level in almost two months after the US Federal Reserve put forward its expectations for an interest rate hike, sending the US dollar higher and sapping demand for metals.
Image Source: © Tomas1111 | Megapixl.com
The three-month copper futures contract on the London Metal Exchange (LME) saw a sizable fall of 4% to US$9,285 a tonne by 1600 GMT.