The Australian share market is expected to start the day lower after US stocks, oil, gold and base metals prices backed away from their recent highs.
At 0700 AEDT on Wednesday, the share price futures index was down 19 points, or 0.32 per cent, at 5,941.
The Australian market on Tuesday suffered its largest daily fall since mid-November, with the mining, energy and healthcare sectors the worst performers.
In economic news on Wednesday, official inflation figures for the December quarter are due out, and in equities news Origin Energy releases its December quarter production report.
The benchmark S&P/ASX200 index dropped 52.6 points, or 0.87 per cent, to 6,022.8 points.
However, the Australian dollar bucked the trend, continuing to eke out gains.
A sell-off in healthcare shares sent the US stock market sliding, with the Dow Jones Industrial Average’s at one point suffering it largest fall in fall in eight months.
Shares of healthcare-related companies sank after Amazon.com , Berkshire Hathaway and JPMorgan said they plan to form a venture aimed at lowering healthcare costs for their US employees.
The Fed’s ongoing two-day meeting will be watched for comments that could raise the likelihood of rates being hiked four times this year, instead of three, especially as inflation readings have firmed in recent readings.
The Dow Jones Industrial Average finished the day down 362.59 points, or 1.37 per cent, at 26,076.89. During intraday trade, the index suffered its steepest intraday point drop since May 17.
The S&P 500 was down 31.10 points, or 1.09 per cent, at 2,822.43 and the Nasdaq Composite was down 64.02 points, or 0.86 per cent, at 7,402.48.
President Donald Trump’s first State of the Union address later on Wednesday morning, Australian time, will be monitored for his comments on a $1.7 trillion infrastructure spending plan and on trade.
Gold futures proved unable to hang on to early gains, ending with a small loss as the dollar pared its decline.
Gold initially found haven-related support as global equities and Treasurys saw renewed selling pressure, analysts said. But while the U.S. dollar remained under pressure, the currency trimmed initial losses, which appeared to sap support for the metal.
IRON ORE: $72.47 -0.12(February contract)
Oil prices tumbled intraday as investors became more cautious and fled from risky assets and rising U.S. production threatened to undercut oil’s recent rally.
U.S. crude futures recently traded down $1.37, or 2.09%, at $64.19 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, was down 98 cents, or 1.41%, at $68.48 a barrel on ICE Futures Europe.
The U.S. dollar edged lower intraday as investors opted to put money into regions with more growth potential.
The Wall Street Journal Dollar Index, which measures the currency against a basket of 16 others, dropped less than 0.1%, to 83.35. The move included declines against the euro, the British pound and the yen.
With expectations for two interest-rate increases by the Federal Reserve already baked into the greenback’s value relative to other currencies, several investors said most of the good news from the U.S. economic expansion is already reflected in the dollar. Fed officials said in December that they intend to raise interest rates three times this year and twice more in 2019.
The Australian dollar has managed to eke out some small gains despite broad-based weakness across US markets and in commodity prices.
At 0635 AEDT on Wednesday, the local currency was worth 80.84 US cents, up from 80.66 cents on Tuesday.
European shares fell back as global markets took a risk-averse turn, with cyclical sectors including mining and financials suffering the sharpest losses.
Europe’s STOXX 600 ended down 0.9 per cent, suffering its biggest one-day loss since early November.
“Today is more of a temporary blip rather than a fundamental change in direction for equities. There were a number of technical indicators pointing towards market complacency and today’s move should provide some relief,” said Prabhav Bhadani, equity strategist at JP Morgan.
The cyclical sectors leading the charge year-to-date were the worst hit as investors took profits after a strong run.
Asian stocks retreated from record highs on Tuesday after a selloff in Apple shares and spike in bond yields knocked Wall Street lower.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 1.1 per cent after rising to an all-time high the previous day. It was still on track for a 6.5 per cent monthly gain.
South Korea’s KOSPI lost one per cent and Japan’s Nikkei dropped 1.4 per cent.
Hong Kong’s Hang Seng slipped 0.9 per cent and Shanghai was down 0.8 per cent.
The bearish sentiment in Asia followed a softer lead from Wall Street, which has led a global equities rally over the past year thanks to strong world growth fuelling higher corporate earnings and stock valuations.
The S&P/NZX50 Index fell 29.02 points, or 0.35 per cent, to 8.298.58 on Tuesday.