Wall Street ends August with a groan over US Fed concern, ASX down

Australian stocks are expected to start the day lower as global stock markets struggled to recover on Wednesday after a three-day losing streak.

ASX futures were down 71 points, or 1 percent, at 6,837 by 6:40 a.m. AEST.

At the same time, the Australian dollar fell to 68.42 US cents.

Last night, US stocks ended the month with their fourth straight daily decline, consolidating August’s weakest performance in seven years as concerns persist about aggressive interest rate hikes by the Federal Reserve.

Adding to the pressure were declines in the technology sector, and more specifically in chipmakers, after dovish forecasts from Seagate and HP.

All three major indices suffered their biggest monthly percentage declines in August since 2015.

After hitting a four-month high in mid-August, the S&P 500 has stumbled in recent weeks, falling more than 8 percent through Wednesday’s close and crashing through several closely watched technical support levels.

Selling pressure accelerated after Fed Chairman Jerome Powell’s aggressive remarks on Friday about keeping monetary policy tight “for some time” dashed hopes of more modest increases in interest rates, with the index benchmark falling more than 5 percent in the past four trading sessions.

“All [Powell] what he cares about is bringing down inflation and raising rates to do that, and in terms of how aggressive that is going to be, that’s all going to be determined by the data,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. .

“Right now we’re in this back-and-forth market, a lot of volatility, concerns that the rally we had was just a bear market rally, probably some concern that we’re going to go back down to new lows.”

Federal Reserve Bank of Cleveland President Loretta Mester said Wednesday that the central bank will need to raise interest rates to just above 4 percent by early next year and keep them there to get inflation back on track. Fed’s goal, and that recession risks over the next year or two have moved up.

The Dow Jones Industrial Average fell 280 points, or 0.9 percent, to 31,510; the S&P 500 lost 31 points, or 0.8 percent, to 3,955; and the Nasdaq Composite fell 67 points, or 0.6 percent, to 11,816.

For the month, the Dow fell 4.1 percent, the S&P 500 lost 4.2 percent and the Nasdaq fell 4.6 percent.

Adding to investor nervousness, stocks are also heading into a historically weak period for the market in September.

“September is usually the worst month of the year: this and February are the only ones that register average falls, but September is the only month of the year that falls more than it rises, so it could end up being a kind of self-fulfilling prophecy” said Sam Stovall, chief investment strategist at CFRA in New York.

Meanwhile, the MSCI All Countries stock index fell 0.2 percent and was down 18.5 percent for the year as the war in Ukraine, rising energy prices and rising interest rates affected risk assets.

Europe’s STOXX stock index of 600 companies slumped 1.1 percent to a six-week low, leaving it down almost 15 percent on the year.

Economic news remained gloomy with overnight data showing economic activity in China, the world’s second-largest economy, extended its decline this month after new COVID-19 infections, the worst heat waves in decades and problems in the real estate sector.

Eurozone headline inflation for August rose to another record, beating expectations and solidifying the case for a sharp rate hike by the European Central Bank on September 8.

Russia on Wednesday halted gas supplies through a major pipeline to Europe for three days of maintenance amid fears it might not be re-ignited, adding to concerns about power rationing over the coming months of winter in some of the richest countries in the region.

In oil markets, Brent crude was lower, trading at $96.50 a barrel, at 07:16am AEST.


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