Opening Call: The Australian share market is to open lower.
Data showed U.S. inflation hit its highest level since November 1990 dragging U.S. stocks lower, while boosting the yield on the 10-year Treasury to 1.57%, the WSJ Dollar Index to 89.01 as well as lifting gold prices. A build-in U.S. oil inventory dragged oil prices lower.
Australia’s S&P/ASX 200 fell 0.1%, dragged by commodity stocks. The benchmark sits 0.4% lower so far this week. Banking stocks pared some of the overall losses.
U.S. stocks fell after data showing that inflation hit a three-decade high added to investors’ concerns about price pressures in the global economy. The benchmark S&P 500 dropped 0.8% a day after ending an eight-session streak of record closes, its longest run of records since 1997. The blue-chip Dow Jones Industrial Average lost 0.7%, while the tech-heavy Nasdaq Composite Index declined 1.7%. Fresh data showed that U.S. inflation rose in October to its highest level since 1990, driven by supply shortages and strong consumer demand. The annual rate of inflation stood at 6.2%.
Gold futures rallied, settling at their highest since June, as data showing the U.S. rate of inflation at its highest in three decades lifted prices for bullion for a fifth consecutive session. Gold is a “perfect inflation hedge” and prices for the metal have made “massive upward moves” in the wake of the data, said Naeem Aslam, chief market analyst at AvaTrade, in a market update.
“This is despite the fact that the dollar index is up, as traders believe that the [Federal Reserve] is behind the curve and they need to do something to control the pace of inflation.”December gold futures rose 1% to settle at $1,848.30 an ounce, with prices notching a fifth straight session rise, the longest run since a five-day rise ended July 7, according to Dow Jones Market Data. Prices settled at their highest since June 16.
Oil futures fell, posting their first loss in four sessions, as official data revealed a weekly rise in U.S. crude inventories for a third week in a row, along with declines in supplies of gasoline and distillates.“It seems unlikely crude prices can break above recent [price] highs until energy traders see whatever action will come from the Biden administration,” said Edward Moya, senior market analyst at Oanda, in a market update. The market believes the U.S. government may release crude from the nation’s Strategic Petroleum Reserve to help ease prices, but speculation over the potential move has managed to put pressure on oil prices.
Moya also points out that “the oil market deficit is firmly in place and that should prevent WTI crude from seeing a significant pullback.”West Texas Intermediate crude for December delivery fell 3% to $81.60 a barrel on the New York Mercantile Exchange after posting gains in each of the last three sessions. January Brent crude, the global benchmark, was off 2.2% to settle at $82.88 a barrel on ICE Futures Europe.
Major currencies were weaker against the US dollar in European and US trade. The Euro fell from US$1.1580 to US$1.1475 and was near the lows in afternoon US trade. The Aussie dollar fell from highs near US73.90 cents to lows near US73.25 cents and was near the lows in afternoon US trade. And the Japanese yen eased from near 112.80 yen per US dollar to JPY114 and was near JPY113.90 in afternoon US trade.
European share markets were firmer on Wednesday. Media (+1.5%) and energy (+0.8%) both rose in response to strong earnings figures. Banks rose 0.5% in response to higher bond yields. But technology fell 1.3%. Luxury stocks fell 1-2.5%. The pan-European STOXX 600 index rose by 0.2%. The German Dax index also rose by 0.2% and the UK FTSE index lifted by 0.9%. In London trade shares in Rio Tinto rose 0.1% while BHP shares rose 0.3%.
Earlier Wednesday, Chinese stocks were dragged lower by liquor makers and the auto sector. “The higher-than-expected inflation data out of China reinforces ongoing concerns around global inflationary pressures,” IG analyst Jun Rong Yeap said. The Shanghai Composite Index dropped 0.4%, while the Shenzhen Composite Index and the ChiNext Price Index each gave up 0.3%. Hong Kong stocks gained ground for a second session, with the benchmark Hang Seng Index adding 0.7%.
Mainland property developers led gains after state media reported that China may ease financing rules for the real estate sector. The recovery was in spite of steep losses in Fantasia Holdings after the company said some lenders were asking for loans to be repaid early, following its surprise bond default last month. The Nikkei Stock Average lost 0.6%, with declines led by tire companies. Worries over China’s property sector are weighing on overall sentiment in the Asian markets, Oanda said.