Opening Call: The Australian share market is to open lower.
U.S. stocks mostly rose following testimony from Federal Reserve Chairman Jerome Powell. The yield on the 10-year Treasury fell to 1.34%, as inflation fears eased. The WSJ Dollar Index dropped to 86.98, helping push gold prices higher. Oil prices fell after a weekly inventories report showed gasoline demand was weaker than expected.
Australia’s S&P/ASX 200 gained 0.3% despite the extension of Sydney’s Covid-19 lockdown through July 30. Consumer shares posted strong gains and the heavyweight materials sector added 0.7%, with gold miners leading the way.
U.S. stocks edged higher after Federal Reserve Chairman Jerome Powell told members of Congress that inflation will moderate and that the central bank plans to maintain its current monetary policies.
All three major indexes were higher in mid-afternoon trading, after wobbling between small gains and losses earlier in the session. As of the 4 p.m. close of trading in New York, the S&P 500 was up 0.1%. The Dow Jones Industrial Average gained 0.1%, while the Nasdaq Composite fell 0.2%.
Mr Powell presented the Fed’s semiannual monetary policy report to the House Financial Services Committee and took questions on topics ranging from the labour market to cryptocurrencies to inflation. He said in testimony that inflation “has been higher than we’ve expected and a little bit more persistent than we had expected and hoped.” But he also noted that price increases should partially reverse as the effects of pandemic-related bottlenecks and supply constraints unwind. He added that the economy is still a ways off from reaching “substantial further progress” toward its employment and inflation goals.
Gold futures marked their highest finish in nearly a month, finding support on the back of a decline in the U.S. dollar and Treasury yields, as Federal Reserve Chairman Jerome Powell offered the first day of his two-day testimony to Congress on the state of the economy.
Mr Powell once again said that he believes the sharp rise in inflation seen so far this year will moderate. Chintan Karnani, director of research at Insignia Consultants, said the takeaway from the comments is that “inflation has to rise even more sharply” and “jobs growth needs to be consistently higher for any early taper or slowing down of bond purchases” by the Fed.
August gold futures climbed 0.8% to settle at $1,825 an ounce. Prices based on the most-active contract saw their highest settlement since June 16, FactSet data show. Prices held onto their gains, at $1,825.10 in post-settlement trade, shortly after the Fed’s Beige Book on economic conditions said the U.S. economy “strengthened further.”
il futures settled lower, pressured by data showing a decline in U.S. gasoline demand, as traders weighed speculation that Saudi Arabia and the United Arab Emirates have made progress toward a compromise on production levels.
Some reports said the U.A.E. and Saudi Arabia had reached a compromise, but the U.A.E. has said no deal has been reached with OPEC+ producers and that talks are ongoing, according to various news reports.
Traders also parsed through U.S. weekly petroleum supply data that revealed that domestic crude supplies fell for an eighth week in a row, but implied demand for gasoline declined.
West Texas Intermediate crude for August delivery fell 2.8% to settle at $73.13 a barrel on the New York Mercantile Exchange. September Brent crude lost 2.3% to settle at $74.76 a barrel on ICE Futures Europe.
Major currencies were firmer against the US dollar in European and US trade. The Euro rose from lows near US$1.1775 to highs near US$1.1835 and was near session highs at the US close. The Aussie dollar rose from lows near US74.35 cents to highs near US74.85 cents and was near US74.80 cents at the US close. And the Japanese yen rose from 110.19 yen per US dollar to JPY109.95
and was near session highs at the US close.
European share markets were slightly weaker on Wednesday. Investors were encouraged by comments by US Fed chief Powell that monetary policy will offer “powerful support” to the economy “until the recovery is complete.” The pan-European STOXX 600 index fell by 0.1%. The German Dax index fell by less than 0.1% while the UK FTSE fell by 0.5%. In London trade, shares in Rio Tinto rose by 0.2% and BHP was up by 0.1%.
Earlier Wednesday, Chinese stocks retreated, as the market continued the past week of range-bound trade. The benchmark Shanghai Composite Index fell 1.1%, the largest one-day percentage decline in nearly two weeks. The Shenzhen Composite Index lost 0.9%, while the ChiNext Price Index declined 0.7%.
Automakers led the downturn, as the sector pulled back from a recent peak. Metal producers further weighed on the market, as copper prices fell amid concerns over slowing demand from China.
Hong Kong stocks also ended lower, snapping a three-day winning streak. The benchmark Hang Seng Index lost 0.6%. Automakers led the downturn, as the sector weakened from a recent rally.
Japanese stocks slipped, dragged by declines in chemical and steel stocks, as concerns continue about elevated U.S. inflation and higher borrowing costs. The Nikkei Stock Average shed 0.4% as investors remained focused on Covid-19 infection trends ahead of the earnings season.