Opening Call: The Australian share market is to open lower.
U.S. stocks wavered before closing lower in choppy trading. The yield on the 10-year Treasury note climbed to 1.733%, up from 1.703% on Wednesday. The WSJ Dollar Index rose 0.17% to 90.17. Oil futures ended higher for a fourth straight session. And gold futures booked their sharpest daily drop in more than six weeks.
Australia’s S&P/ASX 200 index closed 2.7% lower, slumping to its worst daily performance since September 2020 amid intensifying Covid-19 worries and signs the Federal Reserve could raise rates sooner than previously expected. Every sector lost ground as Australia reported a daily record of more than 72,000 new Covid-19 cases, with tech the worst-hit. It shed 6.4% amid heavy losses by sector heavyweights Afterpay, WiseTech and Xero. Health stocks tumbled as the Covid surge forced the postponement of elective surgeries.
U.S. stocks swung between gains and losses intraday as investors tried to assess what kind of impact the Federal Reserve would have on markets if it raises interest rates faster than once anticipated. The S&P 500 fell 0.1%, while the technology-heavy Nasdaq Composite fell 0.1%. The Dow Jones Industrial Average lost about 0.5%. Markets have kicked off 2022 with choppy trading. Volatility accelerated Wednesday after minutes of the Fed’s most recent meeting showed officials eyeing a faster timetable for raising rates. That sent the Nasdaq falling, with the index posting its biggest daily loss since February.
Gold futures settled sharply lower, marking the steepest daily slump for the precious metal in more than six weeks, a day after minutes from the Federal Reserve’s December gathering showed that officials thought rate increases could come sooner and possibly at a faster pace than they previously expected.
February gold was 2% lower to finish at $1,789.20 an ounce, after rising 0.6% in regular trade on Wednesday, with the asset knifing below $1,800 — often viewed as a psychological support level for the yellow metal.
Oil futures ended higher, building on a strong start to 2022, as traders worried about unrest in Kazakhstan and production outages in Libya. West Texas Intermediate crude for February delivery rose 2.1% to close at $79.46 a barrel on the New York Mercantile Exchange, after trading above $80 a barrel for the first time since Nov. 17. March Brent crude, the global benchmark, finished with a gain of 1.5% to close at $81.99 a barrel on ICE Futures Europe. WTI saw its highest close since Nov. 16, while and Brent posted its highest close since Nov. 25.
The situation in Kazakhstan “is becoming increasingly tense. And this is a country that is currently producing 1.6 million barrels of oil per day, ” Barbara Lambrecht, commodity analyst at Commerzbank, said in a note.
Major currencies were weaker against the US dollar in European and US trade. The Euro held between US$1.1283 and US$1.1330 but was near session lows at the US close. The Aussie dollar held
between lows near US71.45 cents and US71.80 cents and was near US71.60 cents at the US close. And the Japanese yen held between 115.64 yen per US dollar and JPY115.96 and was near JPY115.90 at US close.
European sharemarkets fell on Thursday on fears that the US Federal Reserve may raise rates sooner than expected. Technology led the declines, down 2.4%. But banks rose 1.1% with insurance up 0.2%. Shares in Societe Generale’s car leasing division ALD rose 8.4% after agreeing to buy rival LeasePlan for 4.9 billion euros ($5.5 billion). The pan-European STOXX 600 index fell 1.3% from record highs. The German Dax index lost 1.4%. The UK FTSE index fell 0.9%. In London trade, shares in Rio Tinto rose 0.9% but shares in BHP lost 1.0%.
Japanese stocks ended lower, dragged by electronics stocks, as prospects increase for the Federal Reserve to raise rates sooner. Airline and railway stocks fell after local media reported that the government is considering measures to limit restaurants’ operating hours in the Okinawa, Hiroshima and Yamaguchi prefectures. The Nikkei Stock Average fell 2.9%.
Chinese stocks closed lower, tracking broad declines among other Asian equities after the Federal Reserve’s latest meeting minutes showed it may raise interest rates faster than expected. The Shanghai Composite Index was 0.3% lower, the Shenzhen Composite Index slipped 0.1% and the ChiNext Price Index fell 1.1%.
Investors will remain focused on developments pertaining to China’s property market, Oanda said, noting that China Evergrande’s upcoming debt restructuring talks to delay its onshore bond payment will likely continue to weigh on Chinese markets. Auto stocks were lower.