Opening Call: The Australian share market is to open higher.
U.S. stocks fell as investors weighed mixed earnings reports. The yield on the 10-year Treasury ticked down to 2.80%. The WSJ Dollar Index strengthened to 98.95, pushing gold prices lower. Oil prices reversed yesterday’s gains amid demand fears.
Australia’s S&P/ASX 200 gained 0.3% thanks to strength in commodity stocks offsetting weakness elsewhere. The energy sector added 2.8% against a backdrop of higher oil prices. Health, consumer, industrial and tech stocks all fell.
U.S. stock indexes moved lower as a mixed set of earnings reports traced an unsteady path forward for markets ahead of a critical Federal Reserve meeting this week. Stocks opened in the red, with losses building as the day progressed. The S&P 500 closed 1.2% lower. The tech-focused Nasdaq Composite declined 1.9% and the Dow Jones Industrial Average shed 0.7%.
The major indexes are holding onto their July gains, but persistent inflation and signs of a slowing economy are giving investors no time to relax. This week, the busiest of the second-quarter earnings season, also brings a Fed policy meeting at which U.S. central bankers are expected on Wednesday to raise interest rates by 0.75 percentage point in their effort to tame rising prices.
As higher borrowing costs begin to cool economic output, investors are focused on how well household finances and corporate profits are holding up. “We’ve been so spoiled over the last couple years by how every single earnings report was meeting or exceeding expectations,” said Wayne Wicker, chief investment officer at MissionSquare Retirement. “Certainly as we’ve gotten into 2022, that has not been the case.”
Gold prices inched lower as the U.S. dollar has retaken some of the ground it lost last week. Gold prices for August delivery lost $1.90, or 0.1%, to $1,717.20 an ounce. According to Jeffrey Halley, a senior market analyst at OANDA, the technical setup underpinning the gold market doesn’t look very encouraging.
“Gold needs to overcome heavy resistance at the $1,745.00 an ounce triple top before the gold bugs can really start to get excited. It has support at $1,680.00, and then the longer-term support around $1,675.00 an ounce zone,” Halley wrote.
Oil futures ended lower as worries about a recession dulled demand expectations, while U.S. natural-gas prices notched their highest finish in seven weeks after Russia said it will cut supplies to Europe. West Texas Intermediate crude for September delivery fell 1.8% to settle at $94.98 a barrel on the New York Mercantile Exchange. September Brent crude lost 0.7% to settle at $104.40 a barrel on ICE Futures Europe.
The oil market continues to show “significant downside risk and fear of recession,” said Robbie Fraser, manager, global research & analytics at Schneider Electric. That sentiment was clear in the latest International Monetary Fund global economic forecasts, which showed a strong downward revision to expected global GDP growth vs. April projections, he said.
Major currencies were weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.0230 to lows near US$1.0105 and was near US$1.0120 at the US close. The Aussie dollar fell from highs near US69.70 cents to lows near US69.20 cents and was near US69.30 cents at the US close. And the Japanese yen held between 136.30 yen per US dollar and JPY136.85 and was at JPY136.82 at the US close.
European sharemarkets were mixed on Tuesday. Strength in defensive sectors like healthcare and food and beverages offset weakness in retailers – the latter dragged down by a profit warning from US retail giant Walmart. The European Union also approved an emergency plan to cut gas demand. The pan-European STOXX 600 index ended flat. The German Dax index fell by 0.9%. And the UK FTSE index ended flat. In London trade, shares of Rio Tinto fell by 0.5% but BHP shares rose by 0.1%.
Earlier Tuesday, Chinese stocks rebounded from recent declines thanks to a lift from the property sector. Sentiment on the real-estate sector has improved amid stronger expectations of government intervention. The Shanghai Composite Index rose 0.8%, the Shenzhen Composite Index gained 1.0% and the ChiNext Price Index closed 0.3% higher.
Hong Kong’s Hang Seng Index extended early gains to end 1.7% higher, led by tech and property stocks. Alibaba Group rose 4.8% after the company said it would pursue a primary listing in Hong Kong. The Nikkei Stock Average lost 0.2% amid jitters over the economic outlook and business operation costs. Near-term focus will likely be on the FOMC decision later this week as well as on Japanese corporate earnings.