ASX drops today amid interest rate hike calls as Wall St is lowered by commodity prices

The discussion of inflation continues to dominate, with some in the market calling on the Reserve Bank of Australia to change interest rates two years ahead of schedule.

It will likely be a bearish day for ASX today, with index futures suggesting a 40 point drop.

Stock indexes were generally weaker overall yesterday, with the Hang Seng taking the biggest drop. US markets were weighed down by commodity prices, which fell offsetting technological gains.

Here is what we saw:

  • The Australian dollar rose from low near 74.88 cents US to highs near 75.34 cents US and was close to 75.20 US cents at the US close.
  • Global oil prices fell more than 2% on Wednesday. Commsec reports that Iran and the EU have agreed to resume negotiations on a relaunch of the 2015 nuclear deal, potentially increasing Iranian supplies.
  • US crude oil inventories rose 4.3 million barrels last week. It was above expectations for a gain of 1.9 million barrels.
  • The price of Brent crude fell US $ 1.82 or 2.1% to US $ 84.58 per barrel.
  • The price of US Nymex crude fell US $ 1.99 or 2.4% to US $ 82.66 per barrel.
  • Base metal prices fell as China stepped up measures to ease an electricity crisis hampering economic growth and disrupting metal supplies.
  • Tin fell 5.5%.
  • Aluminum fell 5.4%.
  • Nickel fell 3.4%.
  • Copper fell 2.9%.
  • The gold futures price rose US $ 5.40 or 0.3% to US $ 1,798.80 per ounce.
  • Spot gold was trading near US $ 1,797 an ounce at the US close.
  • Iron ore slipped US $ 3.10 or 2.5% to US $ 119.65 a tonne on expectations that lower output from Chinese steel mills will cap gains.

Australian markets

The S & P / ASX 200 closed slightly higher at 7,448.7 yesterday, despite an early pullback due to higher than expected inflation. However, he is expected to dive this morning.

Discussions about inflation continue to dominate, with some in the market calling on the Reserve Bank of Australia to change interest rates two years ahead of schedule.

The September quarter inflation report was released yesterday, causing some gyrations in the market as the Consumer Price Index rose 0.8% in the quarter for a 3% gain on a sliding basis. annual.

The truncated average, which is the measure observed by the RBA, rose 0.7% for a gain of 2.1% year-on-year. This brought the measure within the bank’s target range of 2% to 3% for the first time since the September 2015 quarter.

This is a level he did not plan to reach until 2024, but has been fueled by fuel and housing costs.

Reaching the 2-3% target prompted calls for interest rate hikes.

The RBA will meet on Tuesday to discuss rates, but will need more data before making calls for an interest rate hike.

Citi has followed the events closely. It has now revised upwards its forecasts for tightening inflation and the RBA.

“Fiscal stimulus, accumulated savings, low interest rates and strong demand for housing are driving up discretionary demand for durable goods,” said Citi Australia chief economist Josh Williamson.

“Additionally, the supply issues that have plagued these products are unlikely to be resolved until early in the middle of next year. “

Williamson predicts that core inflation will reach 2.4% in 2022 from the previous forecast of 1.9% towards the middle of the RBA’s 2-3% target range by early 2023.

Citi expects the timing of the first rate hike to be brought forward from Q323 to Q123.

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Australian indices

  • ASX 200 increased 0.071% to 7,448.70.
  • ASX24 futures fell 0.5% to 7,380.
  • The S & P / ASX Small Ordinaries fell 0.47% to 3,551.20.
  • All Ordinaries fell 0.017 %% to 7,758.00.

American markets

Quarterly ones continue to have an impact, although the Dow Jones and S&P 500 closed lower yesterday, ending a string of stock index gains.

These gains can be explained by optimistic quarterly publications, but some companies are showing austerity.

One of which is Boeing.

The world’s largest aerospace company and the leading manufacturer of commercial airliners, defense, space and security systems, Boeing, reported third quarter earnings of $ -0.60 per share on a revenue of $ 15.28 billion, compared to analysts’ expectations of $ -0.15 per share. shares on $ 16.52 billion in revenue, ”said Josh Gilbert, analyst at eToro.

“As one of many companies affected by global supply chain disruptions, Boeing has experienced significant delivery and production delays across its operations. In turn, this subsequently affected its results, with third quarter earnings missing the mark. The company’s revenue grew only 8% year-on-year.

Unfortunately for Boeing, these aforementioned issues also result in significant cash consumption. The company is currently accumulating billions of dollars in aircraft and its free cash flow is still negative at -507 million. ‘a huge improvement over the third quarter of 2020, when cash flow was -5.08 billion US dollars.

“As deliveries on the defense, space and security front increased from 42 in the second quarter of 2021 to 37 in the third quarter of 2021, Boeing has seen increased demand for its commercial aircraft. Boeing’s commercial aircraft deliveries jumped to 85 in the third quarter of 2021, from 79 in the second quarter of 2021.

“Based on the company’s future forecast, it is confident that long-haul travel will show signs of recovery soon. Boeing also predicts that supply to the commercial aerospace industry will be limited until 2023. However, until Boeing manages to deliver the backlog of 787 jets produced while the planes were grounded, its profits will not. should not improve.

“The global travel rebound has started, although it is potentially set to recede, as interest in leisure travel typically wanes during the winter months in Europe and the United States. As a result, airline capacity is expected to continue to remain below pre-pandemic levels for much of the fourth quarter.

“In the end, that doesn’t paint a bright picture in the near term for Boeing, especially as competition intensifies from Airbus, which has delivered more commercial jets in 2021 so far. . ”

Companies affected by Apple have mixed performance

(). Privacy changes to its mobile operating system continue to weigh on some, while others advance.

The most affected are Snap, Facebook, Google and Twitter, but all in different ways.

(). is so far winning the war, however, (). is down, down more than 6%

The new settings allow mobile phone users to opt out of third-party tracking and marketing that helps advertisers target their markets.

Alphabet shares rose 5.8% yesterday, the best one-day performance since February. There was a slight impact on its YouTube business, but overall Alphabet is doing well.

Twitter recorded a 9.9% share sale on Wednesday following its quarterly report.

This is only partly due to changes from Apple as it tries to increase its exposure to direct response ads. The biggest problem for Twitter is the growth of its users in the United States.

“Despite a limited impact from iOS, we believe that with disaster recovery becoming a larger share of ad revenue, Twitter should develop workarounds due to variability in iOS reporting,” wrote James Lee, analyst at Mizuho .

In other news, Microsoft shares rose 4.2% – a record after profits beat analysts’ estimates. McDonald’s rose 2.7% and Coca-Cola 1.9%.

General Motors shares fell 5.4%, although they beat Wall Street’s earnings and earnings estimates. () fell 6.9%, Texas Instruments by 5.1% and Robinhood by 10.4%.

American Indices

  • The Dow Jones fell 0.7% to 35,490.69.
  • The S&P 500 fell 0.5% to 4,551.68.
  • The Nasdaq was stable at 15,235.84.

European markets

European markets were down.

The German Dax was down as Deutsche Bank fell 6.9% after reporting a drop in income from its investment banking unit.

Britain’s FTSE index also fell after UK Finance Minister Rishi Sunak presented his biannual budget update.

In London, Rio Tinto’s trade shares fell 1.4% and BHP’s fell 1.3%.

European indices

  • The STOXX 600 lost 0.36% to 474.04.
  • The German Dax fell 0.3% to 15,705.81.
  • Britain’s FTSE fell 0.3% to 7,253.27.

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