Opening Call: The Australian share market is to open higher.
U.S. stocks started the week lower as markets awaited policy news from the Federal reserve’s meeting Wednesday. The yield on the 10-year Treasury ticked down to 1.42%. The WSJ Dollar Index climbed to 90.2. After starting higher, crude oil prices reversed course to close lower. Gold prices edged higher as the commodity continued to trade within a tight range.
Australia’s S&P/ASX 200 edged 0.35% higher, led by commodity stocks. Energy, materials and real-estate stocks finished higher; every sector had been in positive territory until a last-minute pullback dropped financials, health, consumer discretionaries, consumer staples, and industrials into the red.
Stocks fell ahead of a major decision by the Federal Reserve expected later this week on how aggressively to combat inflation. The S&P 500 fell 0.9%, pulling back after the benchmark gauge closed last week at its 67th record high of 2021. The Dow Jones Industrial Average slid 0.9%, as losses worsened in afternoon trading. The technology-heavy Nasdaq Composite Index declined 1.4%.
The Fed is set to release its decision on Wednesday following the conclusion of a two-day policy meeting. The U.S. central bank is expected to move more quickly to wind down its bond-buying program and signal that it will raise interest rates next year to curb inflation. Data published Friday showed consumer prices increased in November at the fastest annual rate since 1982. Rising prices have rattled policymakers and hurt U.S. consumer confidence, putting pressure on the Fed to act.
Gold prices climbed to their highest settlement in three weeks but stuck to a tight trading range ahead of the U.S. Federal Reserve’s gathering this week, which could solidify bullish or bearish momentum for the precious metals complex. Gold is seeing some support but remains below $1,800 and “within the range it’s traded broadly within over the last few weeks,” said Craig Erlam, senior market analyst at Oanda.
“If it can break above $1,810, it may pick up some momentum to the upside but I struggle to see that ahead of the Fed decision on Wednesday, ” he said in a market update. February gold futures rose 0.2% to settle at $1,788.30 an ounce on Comex after the most-active contract booked gains of less than 0.1% for the week. It was the highest settlement for a most-active contract since Nov. 22, FactSet data show.
Oil futures gave back a portion of last week’s rebound, as worries over the spread of the Omicron variant of the coronavirus that causes Covid-19 cast some uncertainty over the outlook for demand. Losses were trimmed somewhat, however, after the Organization of the Petroleum Exporting Countries, in its monthly report, said it expected the impact of the Omicron variant to be “mild and short-lived.”
“Omicron so far does not look deadly, but there are still lingering concerns about potential oil demand destruction from it,” said Phil Flynn, senior market analyst at The Price Futures Group, in a daily report. West Texas Intermediate crude for January delivery fell 0.8% to $71.13 a barrel on the New York Mercantile Exchange. February Brent crude, the global benchmark, declined 0.8% to $74.55 a barrel on ICE Futures Europe.
Major currencies were mixed against the US dollar in European and US trade. The Euro rose from lows near US$1.1260 to highs near US$1.1305 and was near US$1.1285 at the US close. The Aussie dollar fell from highs near US71.75 cents to lows near US71.10 cents and was near US71.30 cents at the US close. And the Japanese yen firmed from 113.71 yen per US dollar to JPY113.37 and was near JPY113.60 at the US close.
European share markets closed lower on Monday. The pan-European STOXX 600 index fell by 0.4% with travel stocks down 2.6% on risks of tougher movement restrictions after the UK reported its first death from the Omicron coronavirus variant. Vifor Pharma shares jumped 18.5% after confirming that it was in merger talks with Australia’s CSL. The German Dax index ended little changed, but the UK FTSE index slid 0.8%, its worst session in two weeks. In the London trade, shares in Rio Tinto and BHP both fell by 0.1%.
Earlier Monday, Chinese stocks advanced, supported by construction companies. The Shanghai Composite Index gained 0.4%, the Shenzhen Composite Index tacked on 0.6% and the ChiNext Price Index rose 0.9%. There have been some incrementally positive signals on the property sector from the central government, which should boost home buyers’ sentiment and support gradual physical market recovery, Jefferies said. The market is expected to focus on China data due this week, including industrial production, retail sales and fixed asset investment.
Hong Kong shares dropped amid declines by property developers, taking the benchmark Hang Seng Index 0.2% lower. Brokerage Federated Hermes said property developers’ debt problems remained a concern, with Fantasia’s stock dropping by more than 9% after it resumed trading. Japanese stocks rose, led by gains in insurance and shipping stocks, as investors took the prospects of future U.S. policy tightening in stride. The Nikkei Stock Average added 0.7% The Bank of Japan is scheduled to make policy decisions later this week.