Sharemarket: ASX to lift as Wall Street seeks to recover

Sharemarket: ASX to lift as Wall Street seeks to recover

The IMF has also hit out again at the UK government’s mini-budget, saying it’s “not going to work very well”. The Fund indicated that Chancellor Kwasi Kwarteng needs to unveil plans for savings in the coming weeks to ensure his “fiscal package is going to be consistent with what the Bank of England is trying to do.”

Pierre-Olivier Gourinchas, the IMF’s economic counsellor, compared the current British fiscal policy to “two people trying to hold the steering wheel” and turn the car in different directions. “It’s not going to work very well,” he said.

Swiss National Bank President Thomas Jordan signalled that interest rates should rise again as price pressures begin building in the economy.

“Financial conditions should now be tightened with a clear focus on bringing inflation back to target,” he said in Washington, in comments that also warned his counterparts to avoid an “underlying expansionary bias” and to beware of the “political convenience” of looser monetary policy.

Consumers see the US inflation rate cooling modestly over the next year but are less optimistic in the longer term, according to the latest survey by the Federal Reserve Bank of New York.

Median one-year ahead inflation expectations fell to 5.44 per cent in September, down from 5.75 per cent in the prior month and the lowest in a year, the regional Fed bank said in a report. Three years from now, they see prices climbing 2.91 per cent, up from 2.76 per cent in August. Inflation views for five years ahead also rose.

Today’s agenda

9am – RBA assistant governor Luci Ellis speech.
9.30am – AGM: Commonwealth Bank.
10am – AGM: CSL Ltd.
11.30am – ABS data: 2021 census second release.
12.30pm – National Press Club address: federal Attorney-General Mark Dreyfus.
5pm – UK monthly GDP.

Market highlights

ASX futures were up 21 points, or 0.3 per cent, to 6664 near 6am AEDT.

  • AUD -0.3% at US62.85¢
  • Bitcoin -1.2% to $US18,993
  • Dow 0.5% S&P 500 0.4% Nasdaq -0.8%
  • FTSE -1.1% DAX -0.4% CAC -0.1%
  • Gold 0.3% at $US1673.03 an ounce
  • Brent oil -2.1% at $US94.14 a barrel
  • Iron ore -1.7% at $US97.05 a tonne

United States

US stocks climbed, headed for the first daily gain in five days, as dip buyers emerged after the benchmark drop to the lowest intraday level since 2020. The dollar fell, while Treasury yields dropped back from multiyear highs.

The S&P 500 rose to highs of the day as the rally broadened to include all 11 sectors except tech and social-media stocks. In a sign of bids for defensive stocks, health-care topped the leaderboard in the Dow Jones Industrial Average, which outperformed major benchmark rising more than 1%. Treasuries were bid across most of curve.

Still, after a four-day losing streak wiped $US1.6 trillion off the value of the S&P 500 Index, sentiment remains fragile.

US inflation data Thursday may seal the case for another 75-basis-point interest-rate increase in the absence of a major shortfall, given the swaps market is almost fully pricing in such a move at the Federal Reserve’s next meeting.

Europe

European shares fell for a fifth straight session. The region-wide STOXX 600 index closed down 0.6%, hitting an over one-week low.v The blue-chip FTSE 100 fell 1.1%, its fifth consecutive day of losses, with financial stocks dragging the index lower.

Shares of pension providers such as Legal & General , Prudential and Aviva fell between 4.2% and 5.2%.

“The stocks that are getting impacted the most are stocks that are priced off the bond market … the real estate companies, asset backed companies, where it’s clear that the cost of capital is going to go up,” said Roger Jones, head of equities at London & Capital.

UK pension schemes are racing to raise hundreds of billions of pounds to shore up derivatives positions before the Bank of England calls time on support aimed at keeping them afloat.

The Bank of England plans to stop buying bonds on Oct. 14, leaving pension schemes scrambling to meet a collective cash call estimated to be at least £320 billion ($US355 billion) without a buyer of last resort.

The central bank on Tuesday made its fifth attempt in just over two weeks to try and restore order in markets, after a surge in yields on Sept. 28 threatened to overwhelm pension schemes that had loaded up on leveraged derivatives.

Commodities

President Joe Biden is re-evaluating the US relationship with Saudi Arabia after OPEC announced last week that it would cut oil production, White House national security spokesman John Kirby said.

European natural gas prices picked up as Russia’s fresh strikes across Ukraine raised concerns about fuel flows crossing the war-torn country.

For now, gas transit remains stable, including shipment orders for Wednesday. Yet, Kyiv decided to stop electricity exports to the European Union given the damage to its energy infrastructure, making markets nervous about risks to gas pipelines. Benchmark futures rose as much as 7.6 per cent before paring some gains.

Edward Moya, senior market analyst for the Americas at OANDA: ” Crude’s weakness occurs as the risk of significant supply disruptions remain elevated. WTI crude will likely use the $US90 level as the centred line for the demand and supply side to play tug-of-war.

“Despite all the short-term growth fears, oil’s downside should be limited. It would take the worst-case scenario for global stagflation for crude prices to return to the September lows.”

– with wires

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