Opening Call: The Australian share market is to open higher.
U.S. stocks advanced after inflation data was in line with expectations. The yield on the 10-year Treasury ticked down to 1.49% as the inflation data reinforced investors’ expectations that the Federal Reserve will tighten monetary policy next year. The WSJ Dollar Index ticked lower to 89.9. Oil prices rose as OPEC+ was seen as ready to tighten output if prices get too soft and thorny nuclear talks with Iran increased supply risks. Gold prices were pushed higher by the inflation reading.
Australia’s S&P/ASX 200 gave back 0.4%, paring gains as uncertainty over the impact of the Omicron Covid-19 variant continued to sway global equity markets. The health, energy and tech sectors led the losses, slightly offset by consumer and utility stocks. Eight of the nine largest health companies by market capitalization lost ground. The ASX 200 rose 1.55% for the week.
U.S. stocks and oil prices gained after fresh inflation data piqued investors’ hopes that price rises may be nearing a peak. The S&P 500 closed at a record, advancing about 1%. The move marked the index’s largest one-week percentage gain since the week ending Feb. 5. The tech-focused Nasdaq Composite Index climbed 0.7%, while the Dow Jones Industrial Average rose 0.6%.
Inflation hit an almost four-decade high in November. Labor Department figures showed that the consumer price index — which measures what people pay for goods and services —rose 6.8% in November from a year ago. Price pressures have been driven by strong demand and supply-chain woes related to the pandemic, as well as higher energy prices.
“There’s a bit of a relief in the market at the moment. It’s in line with market expectations and in addition, there’s an expectation this is the peak of year-on-year inflation numbers,” said Edward Park, chief investment officer at investment firm Brooks Macdonald.
Gold prices turned higher in response to the released U.S. inflation data. Prices for the precious metal had been stuck in range-bound trading, “supported by inflation and Omicron concerns as well as persistently, historically-low real rates,” but prices were capped by a strong U.S. dollar and concern the Federal Reserve may more aggressively tighten monetary policy, said Jeff Klearman, portfolio manager at GraniteShares, which offers the GraniteShares Gold Trust BAR.
February gold futures climbed 0.5% to settle at $1,784.80 an ounce. Prices settled slightly above the most-active contract’s week-ago finish of $1,783.90, FactSet data show.
Oil prices marked their biggest weekly gain since August, “despite the ongoing uncertainty revolving around the Omicron variant,” said Lukman Otunuga, manager, market analysis at FXTM. “Even before the Omicron menace hijacked the headlines, the outlook for oil was…shaky amid expectations around oil markets returning to oversupply in the coming months,” Mr Otunuga said. “With the new virus in town threatening global demand and OPEC+ moving ahead with its planned January oil output rise of 400,000 [barrels per day], oil remains vulnerable to downside losses.”West Texas Intermediate crude for January delivery rose 1% to settle at $71.67 a barrel on the New York Mercantile Exchange. February Brent crude added 1% to end at $75.15 a barrel on ICE Futures Europe.
Major currencies were firmer against the US dollar in European and US trade. The Euro rose from lows near US$1.1264 to highs near US$1.1322 and was near US$1.1310 at the US close. The Aussie dollar lifted from lows near US71.40 cents to highs near US71.82 cents and was near US71.70 cents at the US close. And the Japanese yen rose from 113.78 yen per US dollar to JPY113.22 and was near JPY113.40 at the US close.
European sharemarkets ended lower on Friday. The pan-European STOXX 600 index fell by 0.3% with retail stocks down 1.4%. But the index was up 2.8% over the week, the most since March. The German Dax index lost 0.1% and the UK FTSE index slid 0.4% on Friday. The UK economy (GDP) grew just 0.1% in October (survey: +0.4%). In London trade, shares in Rio Tinto (-0.4%) and BHP (-0.2%) both fell.
Earlier Friday, Chinese stocks closed the session mixed, weakening slightly from several sessions of gains. N-Securities said the market has likely faced some profit-taking pressure after the recent gains. The benchmark Shanghai Composite Index lost 0.2%, while the Shenzhen Composite Index edged up 0.1%. The ChiNext Price Index, a measure for emerging industries, rose 0.2%. Metal producers and media firms were among the top gainers, while the oil sector led losses.
Hong Kong stocks fell, as concerns about Omicron-related restrictions and heavily indebted Chinese developers rattled investors’ nerves. Tech and casino shares took a hit. The Hang Seng Index fell 1.1% on the day but was up 1.0% for the week. Japanese stocks closed broadly lower as concerns continued about the Omicron variant and the Fed’s potential shift to tightening. The Nikkei Stock Average lost 1.0%.