Opening Call: The Australian share market is to open higher.
Australia’s S&P/ASX 200 index closed 0.2% lower. Xero, WiseTech and Computershare gave up between 0.7% and 3.0%. Travel agents Webjet, Flight Centre and Corporate Travel Management fell by between 2.0% and 4.1%. Banks Commonwealth, NAB, ANZ and Westpac edged lower by between 0.1% and 0.9%.
U.S. stocks edged lower after Federal Reserve Chairman Jerome Powell acknowledged that the central bank’s rate-raising campaign could cause an economic downturn. The S&P 500 was down 0.1%, while the Dow Jones Industrial Average and the tech-heavy Nasdaq Composite Index each slipped 0.15%. Mr. Powell said the central bank plans to continue raising interest rates until it sees clear evidence that inflation is slowing to its 2% target.
“Folks are really reckoning with the fact that probabilities of recession seem to be increasing,” said Gavin Stephens, director of portfolio management at Goelzer Investment Management. Earlier, in Asia, Japan’s Nikkei Stock Average closed 0.4% lower amid persistent concerns about interest rates and inflation. Energy stocks led losses as oil prices fell on inflation worries. Japan Petroleum Exploration slipped 3.0%, Inpex dropped 3.9% and Idemitsu Kosan fell 3.3%.
Gold futures finished modestly lower as Federal Reserve Chairman Jerome Powell said in testimony before the Senate Banking Committee that ongoing interest-rate increases will be “appropriate.” August gold edged down by 0.02% to settle at $1,838.40 an ounce on Comex. A “near recession outlook for the second half of the year can cause a pause in interest-rate hikes,” said Chintan Karnani, director of research at Insignia Consultants, which may support gold prices.
Oil futures moved sharply lower, with the U.S. crude benchmark settling at its lowest price in roughly six weeks as investors refocused on demand worries amid rising recession expectations. West Texas Intermediate crude for August fell 3% to settle at $106.19 a barrel on the New York Mercantile Exchange, after tapping a low of $101.53. August Brent crude, the global benchmark, fell 2.5% to $111.74 a barrel on ICE Futures Europe. “Oil is lower on demand concerns, the prospect of a U.S. gasoline tax holiday, and renewed fears of a recession,” said Phillip Streible, chief market strategist at Blue Line Futures.
Major currencies were firmer against the US dollar in European and US trade. The Euro rose from US$1.0470 to highs near US$1.0600 and was near US$1.0565 at the US close. The Aussie dollar rose from US68.80 cents to near US69.50 cents and was near US69.30 cents at the US close. And the Japanese yen rose from 136.60 yen per US dollar to JPY135.70 and was near JPY136.23 at the US close.
European sharemarkets fell on Wednesday but ended off the lows. UK inflation hit a fresh 40-year high of 9.1% in May, adding to investor jitters. But comments by the US Fed chair soothed investor concerns about potentially runaway inflation. Shares in major steelmaking companies fell by 11-13% after a broker downgrade. The pan-European STOXX 600 index fell by 0.7% after earlier being down 1.8%. The German Dax index lost 1.1% and the UK FTSE index fell by 0.9%. In London trade, shares of Rio Tinto fell by 4.4% and BHP lost 3.8%.
Chinese stocks closed lower, weighed by electronics and software companies, while the solar-energy industry gained. The Shanghai Composite Index slipped 1.2%, ending lower for the third straight session. Worsening U.S. economic data and monetary tightening by global central banks could hurt the market’s risk appetite and put pressure on the A-share market, Shanxi Securities said in a note. Luxshare Precision shed 5.2% and iFlytek lost 3.8% while polysilicon producer Tongwei added 2.6%. The Shenzhen Composite Index gave up 1.3% and the ChiNext Price Index was 0.6% lower.