Opening Call: The Australian share market is to open lower.
Australia’s S&P/ASX 200 lost 1.5%, compounding early losses after retail data showed the continuing impact of Covid lockdowns. Shares in 19 of the 20 largest companies by market capitalization fell. Consumer stocks slumped after retail sales fell 1.7% in August. Only the energy and utility sectors defied the gloom.
U.S. stocks tumbled as rising bond yields deepened a rout in shares of technology companies. The S&P 500 fell 2%, a second straight day of losses. The tech-heavy Nasdaq Composite Index slid 2.8%, while the Dow Jones Industrial Average shed 1.6%. For much of the past decade, many investors had piled into shares of fast-growing technology companies, wagering they would deliver relatively robust profit growth even in a sluggish economic environment. This week, that trade hit a roadblock.
With the economy out of the worst of the pandemic-fueled crisis, the Federal Reserve signalled last week that it could start to reverse its pandemic stimulus programs as soon as November and raise interest rates sometime next year. That appears to have prompted an unwind of some of the market’s most enduring trades-pushing Treasury yields to their highest level in months and sending investors out of popular technology stocks.
Gold futures posted their lowest settlement in seven weeks, weighed down by steadily rising U.S. Treasury yields and a strengthening dollar. December gold futures fell 0.8% to settle at $1,737.50 an ounce, with the most-active contract at the lowest settlement since Aug. 10, FactSet data show.
“Gold held up surprisingly well but is unlikely to come out unscathed from an environment of rising real rates and a yield-powered dollar,” wrote Marios Hadjikyriacos, senior investment analyst, in a research note.
Oil futures settled with a loss, their first in six sessions, as Brent crude eased back from intraday highs above $80 a barrel – the global benchmark’s highest prices in almost three years. Weeks of declining U.S. crude inventories and recent supply outages prompted prices for U.S. and global benchmark oil to climb to their highest settlements since October 2018 on Monday, but losses in the stock market and a drop in U.S. consumer confidence raised concerns about near-term energy demand.
Meanwhile, natural-gas prices pared some of their earlier gains, but still marked another finish at the highest in over seven years on tight U.S. supplies. November Brent crude fell nearly 0.6% to settle at $79.09 a barrel on ICE Futures Europe after trading as high as $80.75. December Brent, the most actively traded contract, lost 0.5% at $78.35 a barrel. November West Texas Intermediate crude, the U.S. benchmark, declined by 0.2% to settle at $75.29 a barrel on the New York Mercantile Exchange.
Major currencies were weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.1700 to lows near US$1.1670 and was near US$1.1685 at the US close. The Aussie dollar fell from highs near US73.10 cents to lows near US72.25 cents and was near US72.40 cents at the US close. And the Japanese yen fell from 111.18 yen per US dollar to JPY111.62 and was near JPY111.50 at the US close.
European share markets fell on Tuesday. Technology fell 4.8% as bond yields rose – the ‘growth’ sector is sensitive to higher interest rates. Investors are also worried that an unfolding power crisis may slow economic growth in China. The pan-European STOXX 600 index fell by 2.2% – the biggest fall in two months. The German Dax index fell by 2.1%. And the UK FTSE index lost 0.5%. In London trade, shares in Rio Tinto fell by 0.6% and shares in BHP fell by 1.6%.
Earlier Tuesday, Chinese stocks ended the day mixed, weighed by auto and baijiu stocks. While the Shanghai Composite Index rose 0.5%, the Shenzhen Composite Index slipped 0.2% and the ChiNext Price Index declined 0.6%. Automakers were among the worst performers. Although the Evergrande saga seems to have receded in the minds of financial markets this week, concerns over China’s electricity crunch appear to be gathering steam, Oanda said.
Hong Kong shares advanced, as property-related stocks benefited from dissipating Evergrande concerns. Chinese energy majors were helped by rallying energy-commodity prices. The benchmark Hang Seng Index gained 1.2%, while the Hang Seng Tech Index rose 2.1%. Japanese stocks retreated, dragged by sharp drops in shippers and tech companies, as reports of the potential ending of a Covid-19 state of emergency triggered profit-taking in sectors related to e-commerce. The Nikkei Stock Average fell 0.2%. Investors are focused on Japan’s ruling-party chief election, set for Wednesday, which will effectively decide the next prime minister.