Opening Call: The Australian share market is to open higher.
U.S. stocks fell and the yield on the 10-year Treasury climbed to 2.9% as Federal Reserve Chairman Jerome Powell signaled the central bank was likely to raise interest rates by a half percentage point at its meeting next month. The WSJ Dollar Index rose to 93.2. U.S. oil prices finished higher for the sixth time in the past seven sessions after yesterday’s bullish storage report. Gold prices continued their retreat from Monday’s high.
Australia’s S&P/ASX 200 added 0.3%, finishing just short of a record amid a five-day winning streak. The heavyweight financial sector added 1.1% as banks ANZ, Westpac, NAB and Commonwealth gained between 0.3% and 1.0%. Takeover target Ramsay Health Care rose another 3.7%, but materials and tech stocks pared overall gains. The ASX 200 closed 0.5% short of its August 2021 record.
U.S. stocks erased their gains from earlier in the day, as a selloff in government bonds picked up steam. The S&P 500 fell around 1.5%. The Nasdaq Composite dropped about 2.1%, adding to losses from Wednesday after a selloff in Netflix shares led the technology sector lower. The Dow Jones Industrial Average was down around 1.1%.
Investors this year have had to weigh signs of solid economic activity against fears that the Federal Reserve will tighten monetary policy too quickly, potentially tripping up markets. Many investors credit stocks’ strong run over the past few years in part to extraordinary levels of monetary support from central banks.
With the Fed preparing to raise rates several more times this year and unwind its $9 trillion balance sheet, some money managers worry risky assets will struggle to hold onto the momentum of prior years. Anxiety over the Fed’s projected rate-increase path has already helped fuel selling in Treasurys. The renewed push higher in bond yields put fresh pressure on the stock market.
Gold futures extended their retreat from Monday’s high above $2,000 an ounce. Gold futures for June delivery fell 0.4% to settle at $1,948.20 an ounce on Comex, leaving it down 1.4% for the week so far. “This week’s chorus of hawkish Federal Reserve comments and a return to positive real rates have reduced the appeal of both gold and silver,” analysts at Zaner wrote.
Oil futures finished higher, but below the session’s best levels, as the European Union continued to mull the prospect of banning imports of Russian crude. European Union countries are edging closer to a plan to eventually phase out imports of Russian oil, news reports said. The U.S. and U.K. previously moved to implement bans in response to Russia’s invasion of Ukraine, while the EU has moved more slowly amid resistance given the region’s heavy reliance on energy supplies from the country.
“More likely will be a gradual phasing out of Russian oil, much like we are seeing with coal,” said Warren Patterson, head of commodities strategy at ING. “A gradual phasing out would give time for trade flows to adjust in a more orderly fashion and so the impact on price would be more limited compared to an immediate ban,” he said. West Texas Intermediate crude for June delivery rose 1.6% to settle at $103.79 a barrel on the New York Mercantile Exchange after trading as high as $105.42. June Brent crude added 1.4% to settle at $108.33 a barrel on ICE Futures Europe.
Major currencies were weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.0935 to lows near US$1.0830 and was near session lows at the US close. The Aussie dollar fell from highs near US74.55 cents to lows near US73.63 cents and was near US73.70 cents at the US close. And the Japanese yen eased from near 127.49 yen per US dollar to JPY128.69 and was near JPY128.37 at the US close.
European sharemarkets were generally firmer on Thursday in response to strong earnings figures. Also buoying sentiment was news that President Emmanuel Macron maintained his lead in polls ahead of Sunday’s election runoff with far-right rival Marine Le Pen. The pan-European STOXX 600 index rose by 0.3%. The German Dax rose by 1.0% but the UK FTSE fell by less than 0.1%. In London trade, shares of Rio Tinto fell by 1.8%. Shares in BHP fell by 2.5%.
Earlier Thursday, Chinese stocks fell amid concerns over the country’s slowing economy and as an uncertain pandemic policy continued to weigh on sentiment. The benchmark Shanghai Composite Index fell 2.3%, while the Shenzhen Composite Index lost 3.1%. The ChiNext Price Index declined 2.2%. The tourism sector led losses, with tourism agency China CYTS Tours losing 6.8% and tourism-attraction site operator Emei Shan Tourism dropping 8.7%.
Hong Kong stocks extended their losing streak to three as sentiment remained weak due to China’s Covid-19 resurgence and expectations of a substantial economic slowdown in the second quarter. The benchmark Hang Seng Index fell 1.3%. Chinese internet giants led the downturn, tracking the sector’s deep losses on Wall Street overnight.
Japan’s Nikkei Stock Average, however, advanced 1.2%, led by gains in electronics and machinery stocks amid easing concerns over higher borrowing costs. Nikkei has been helped by the BOJ conducting rate-capping operations in the JGB market, said Oanda’s senior market analyst Jeffrey Halley.