ASX 200: Will Fed's inflation stance continue to weigh on shares?

Summary

  • The ASX 200 opened in the negative zone on Thursday after the US Federal Reserve projected sooner-than-expected rise in rates.
  • By 10:30 AM (AEST), the ASX 200 was trading 0.55% higher, at 7,345.40.
  • The Dow Jones fell 0.8%, the S&P 500 dropped 0.55%, and the NASDAQ dipped 0.25 in the overnight trade.

The ASX 200 opened in the negative zone on Thursday after the US Federal Reserve kept the interest rates unchanged but projected sooner-than-expected rise in rates.

The benchmark dropped 10.20 points or 0.14% to 7,376 by 10:05 AM (AEST). On Wednesday, the benchmark scaled a new all-time high level and closed the session 0.09% up, at 7386.2.

The Dow Jones fell 0.8%, the S&P 500 dropped 0.55%, and the NASDAQ dipped 0.25%. The Fed said that it expects the first post-coronavirus rate hike to happen in 2023.

Meanwhile, the Reserve Bank of Australia (RBA) governor Philip Lowe on Thursday said that “it is time to be thinking about how we (economy) transition from recovery mode to expansion mode.” Lowe also said that the CPI inflation would temporarily rise in the June quarter to around 3.5%.

Source: ©Ymgerman    | Megapixl.com

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What has happened so far?

By 10:30 AM (AEST), the ASX 200 was trading 0.55% higher, at 7,345.40.

Over the last five days, the index has gained 0.60% and is currently 0.81% off its 52-week high.                   

Most sectors were trading in the red.

                         

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Metals & Mining and Materials fell the most, 2.2% and 1.9%, respectively. Resources was down 2%, while Energy fell 1.8%.

Financial sector was up 0.5%. The banking stocks moved higher with Westpac up 1%, CBA up 0.5%, ANZ up 1%and NAB up 0.7%.

The broader All Ordinaries index was down 0.562%, while the ASX 200 VIX Index was down 0.198%.

Source: ASX website; as of 10:30 AM (AEST)

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Bond yields and dollar

Following the statement from Federal Reserve, the benchmark 10-year US Treasury yield jumped on the statement, rising to 1.5278%. The 10-year Australian bond yields were trading 6.09% higher, at 1.586.

The Australian dollar was trading unchanged at 0.7614. The dollar index was last up 0.63% at 91.103.

Commodity update

Crude oil prices traded mixed overnight. The WTI crude oil price was down 0.4% to US$71.85 a barrel and the Brent crude oil price rose 0.1% to US$74.04 a barrel.

The WTI crude oil futures were trading 0.83% lower, at US$71.55.

Spot gold was little changed at US$1,859.62 per ounce, after declining on Monday to US$1,843.99, its lowest level since 17 May 2021.

The gold futures were trading 2.81% lower, at US$1,818.10.

Source: ©Shimanovichs   | Megapixl.com

Metals’ update

The Chinese iron ore futures fell on rising shipments from major suppliers and were followed by a decline in steel prices as traders are getting nervous over potential curb on prices by the Chinese government.

Copper prices recovered from lower levels on Wednesday after touching their lowest level in more than seven weeks as China's release of some of its metals’ stockpiles may be modest in copper. The three-month copper futures contract on the London Metal Exchange gained 1.1% to US$9,671 a tonne by 1600 GMT.

The copper futures were trading 0.48% higher, at US$4.2890.

Newsmakers

Whitehaven (ASX:WHC) has downgraded its 2021 production guidance to 20.4 million tonnes, from its previous guidance of between 20.6 million and 21.4 million tonnes.

Seven West Media (ASX:SWM) expects its FY2021 underlying earnings to be ahead of consensus forecasts. The underlying EBITDA would be between AU$250 million and AU$255 million.

Ramelius Resources (ASX:RMS) has begun ore mining at its Tampia gold mine, with the first ore mined initially from the North Pit.

Challenger (ASX:CGF) has reaffirmed its FY21 profit guidance. The normalised net profit before tax may be at the bottom end of its guidance range of between AU$390 million and AU$440 million.

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