Opening Call: The Australian share market is to open higher.
U.S. stocks ended higher despite a profit warning from Target. The yield on the 10-year Treasury note declined to 2.99% from 3.04% on Monday. The WSJ Dollar Index was down 0.02% at 95.13. U.S. oil prices ended a choppy session at a three-month high. And gold prices ended modestly higher on a slightly weaker dollar.
Australia’s S&P/ASX 200 index closed 1.5% lower after the Reserve Bank of Australia delivered a bigger-than-expected rate increase. The RBA raised its cash rate by 50 basis points to 0.85%, compared with the 25 basis points expected by most economists. Every sector fell, with tech, real-estate, consumer-discretionary and financial stocks hit the most.
U.S. stock indexes climbed in a volatile session as investors continued to assess the outlook for inflation and economic growth. The S&P 500 rose 1%, driven by gains in 10 of the index’s 11 sectors. The Nasdaq Composite Index climbed 0.9%, while the Dow Jones Industrial Average increased 0.8%. All three indexes had opened modestly lower after a profit warning from Target cast a pall over the retail sector.
Target shares dropped 2.3% after the retailer issued a warning that its profit would decline because it needs to cancel orders or offer discounts to clear out unwanted goods, a potential sign of lower consumer spending. Shares of other big retailers followed, with Walmart declining more than 1%.
A significant increase in retail inventories and diminishing demand could cause prices to moderate across most consumer goods in the second half of the year, according to Peter Essele, head of portfolio management at Commonwealth Financial Network. “That would be a good thing for inflation overall and would help buoy markets higher as inflation continues to decline,” Essele said.
Gold futures closed modestly higher as the precious metal recovered from back-to-back losses. August gold gained 0.5% to settle at $1,852.10 per ounce on Comex. The U.S. dollar gave up earlier gains to turn lower against a basket of its main rivals. Analysts with Kitco attributed gold’s modest gains to “bargain hunting” following the yellow metal’s recent move toward $1,800 per ounce. They also cited weaker U.S. stocks and stubborn inflation worries as reasons for the move.
Oil futures ended a choppy session with gains, putting the U.S. benchmark at a three-month high just below $120 a barrel as investors await storage data. West Texas Intermediate crude for July delivery rose 0.8% to close at $119.41 a barrel on the New York Mercantile Exchange, the highest finish for a front-month contract since March 8.
August Brent crude, the global benchmark, rose 0.9% to settle at $120.57 a barrel on ICE Futures Europe, its highest finish since May 31. Crude oil saw choppy price action but remained supported as demand revived, with China ending Covid-19 lockdowns and as concerns remain over tight supplies.
Major currencies were firmer against the US dollar in European and US trade. The Euro rose from lows near US$1.0655 to highs near US$1.0710 and was near session highs at the US close. The
Aussie dollar rose from lows near US71.60 cents to highs near US72.40 cents and was near highs at the US close. And the Japanese yen rose from 133 yen per US dollar to JPY132.35 and was near JPY132.65 at the US close.
European sharemarkets fell on Tuesday on fears that aggressive rate hikes by central banks could flatten major economies. Data showed German industrial orders fell for the third time in a row in
April. The technology sector fell by 1.1%. And the retail sector was down by 0.9% after US retailer Target again trimmed margin forecasts. The pan-European STOXX 600 index lost 0.3%. The German Dax index fell by 0.7% and the UK FTSE index eased by 0.1%. In London trade, shares of Rio Tinto rose by 2.3% and BHP shares were up 1.9%.
Earlier, in Asia, Japanese stocks ended slightly higher, led by gains in auto stocks, as the yen weakened to a new 20-year low. Subaru gained 3.2% and Nissan Motor climbed 2.6%. The Nikkei Stock Average gained 0.1%. Chinese stocks ended the session mixed. The Shanghai Composite Index rose 0.2%, the Shenzhen Composite Index closed down 0.02%, and the ChiNext Price Index was flat. Auto stocks fell, with SAIC Motor slipping 2.4% and Great Wall Motor declining 3.5%.