Opening Call: The Australian share market is to open higher.
U.S. stocks fell as investors fretted over some hawkish comments by the Federal Reserve. The yield on the 10-year Treasury advanced to 2.97%, its highest level in a month. The WSJ Dollar Index rallied to 99.52, pushing gold prices lower. Oil prices settled modestly higher but ended with a 1.4% weekly decline.
Australia’s S&P/ASX 200 also closed flat to wrap up a fifth consecutive weekly gain. Weakness in financial and health stocks effectively offset gains by commodity stocks, but the benchmark index still rounded out its longest run of weekly wins since June 2021. The ASX 200 rose 1.2% for the week.
U.S. stocks fell, ending the week lower and snapping a four-week stretch of gains for the S&P 500, as investors second-guessed how aggressively the Federal Reserve will need to move to tame inflation. The market endured a stretch of choppy moves as traders reassessed their bets on what the Fed might do at its September meeting. For weeks, many investors had been feeling confident that inflation had possibly peaked and that the central bank would soften the magnitude of its future interest-rate increases.
But comments in recent days from central bank officials, combined with the release of the minutes from the Fed’s July meeting, put the possibility of continued aggressive rate increases back in focus. “This feels like a re-evaluation of whether there has been enough financial tightening,” said John Roe, head of multiasset funds at Legal & General Investment Management. “And if there hasn’t actually, could we get more pain from central banks having to do more?”
The S&P 500 dropped 1.3% for the session and fell 1.2% for the week. The Dow Jones Industrial Average gave back 0.9% on the day and lost 0.2% for the week. The Nasdaq Composite declined 2% Friday and fell 2.6% for the week. This week, central bankers will meet in Jackson Hole, Wyo., for the Federal Reserve Bank of Kansas City’s annual economic policy symposium. Traders will be watching officials’ speeches closely for insights on how the Fed is thinking.
Gold ended at its lowest price in just over three weeks, down a fifth straight session to mark its longest losing streak since early July, as rising Treasury yields and a resurgent U.S. dollar undermined support. December gold futures lost 0.5% to settle at $1,762.90 per ounce on Comex with the most-active contract at its lowest finish since July 28. Prices marked a weekly loss of 2.9%, according to Dow Jones Market Data.
Gold fell as the dollar continued to see strong support, said Craig Erlam, senior market strategist at Oanda. “The resurgence in the greenback has weighed heavily on the yellow metal, which was already seeing profit-taking after reaching $1,800,” Erlam said.
Oil futures settled higher, but the potential for an Iranian nuclear deal that may lead to higher global supplies and the potential for a slowdown in energy demand kept prices lower for the week. West Texas Intermediate crude for September delivery rose 0.3% to settle at $90.77 a barrel on the New York Mercantile Exchange. WTI was 1.4% lower for the week, according to Dow Jones Market Data. October Brent crude added 0.1% to $96.72 a barrel on ICE Futures Europe. It lost 1.5% for the week.
“The energy market in the U.S. is a smooth sail compared to the complete chaos in Europe, where a trifecta of a massive [natural] gas shortage, a tragic drought and insane electricity prices [have] turned the markets upside down,” said Manish Raj, chief financial officer at Velandera Energy Partners.
Major currencies were weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.0095 to lows near US$1.0030 and was near US$1.0034 at the US close. The Aussie dollar fell from near US69.20 cents to US68.60 cents and was near US68.72 cents at the US close. And the Japanese yen eased from near 136.20 yen per US dollar to JPY137.20 and ended US trade near JPY136.93.
European sharemarkets closed weaker on Friday in response to new inflation data. German producer prices rose by a record 5.3% in July to be up 37.2% on the year – the biggest jump since 1949.
Higher energy prices were the key drivers. Just Eat Takeaway.com rose 25.8% after agreeing to sell 33% stake in Brazil’s iFood to technology investor Prosus. The pan-European STOXX 600 index
lost 0.8% to be down 1% on the week. The German Dax index fell by 1.1%. But the UK FTSE index rose by 0.1%. In London trade, shares of Rio Tinto fell by 0.7% while BHP shares were up by 0.7%.
Earlier Friday, Chinese shares ended lower amid worries about an unusual heatwave that prompted authorities to issue the first national drought alert of the year. “China is facing the most intense heat wave in six decades,” Commerzbank analysts said. They add that this could be “another piece of negative news that will hamper hopes of a swift recovery.” The benchmark Shanghai Composite Index slipped 0.6%, the Shenzhen Composite dropped 1.3% and the ChiNext Price Index fell 1.5%.
Hong Kong’s Hang Seng Index edged less than 0.1% higher as investors weighed mixed U.S. economic data against hawkish Fed officials’ comments. Investors don’t seem convinced by more potential aggressive tightening measures, Tina Teng, markets analyst at CMC Markets, said. The Hang Seng Tech Index closed flat. The Nikkei Stock Average closed flat as drops in tech and pharmaceutical stocks offset gains in electronics and energy shares. Broader market index Topix rose 0.2%.