Australian stocks have opened higher, ahead of the Reserve Bank’s interest rate decision on Tuesday.
- The RBA is widely expected to raise the cash rate by 50 basis points.
- For the first eight months of the year, the ASX has lost 8.2 percent
- US markets will be closed tonight for Labor Day
Global stocks broadly ended lower last week as investor sentiment remained tempered by fears of aggressive rate-hike bets coupled with fears of further disruptions to European gas supplies from Russia.
However, the ASX 200 was up 28 points, or 0.4 percent, at 6,857 at 10:17 am AEST, with energy shares (+2.4 percent) leading the gains.
Whitehaven Coal jumped 4.6 percent, Coronado Global Resources firmed 4.4 percent and Beach Energy gained 4 percent.
Other resource shares were generally higher, with BHP 2 percent and Rio Tinto 1.5 percent.
However, Fortescue weighed on the market after its ex-dividend today, down 5.6 percent.
Imugene was another big loser, losing 4.1 percent at the open.
The Australian dollar fell to 67.93 US cents, while Brent crude rose, trading at $94.59 a barrel.
Wall St closes lower as jobs report gain fades
Data showed on Friday that US employers hired more workers than expected in August, but subdued wage growth and a rise in the unemployment rate to 3.7 percent suggested there may be less pressure on the Federal Reserve to deliver. a third interest of 75 basic points. rate hike this month.
Initially, this buoyed investors and helped the S&P 500 index rise more than 1 percent. But the gains were reversed into losses during the day, dogged by concerns that a 75 basis point rate hike was still on the cards.
The S&P 500 and the Dow Jones Industrial Average each lost 1.1 percent, and the Nasdaq Composite fell 1.3 percent.
The softer data is seen as easing the need for the Fed to raise rates to aggressively curb inflation, moves the market is concerned could spark a recession.
Indeed, some analysts said the latest jobs data kept the debate alive over whether the Fed will raise interest rates by 50 basis points at the end of this month, or by 75 basis points.
“We continue to expect the Fed to hike 50 basis points in September and November. This report contained enough good news for the Fed,” Bank of America (BofA) analysts said in a note to clients.
But aggressive comments from Treasury Secretary Janet Yellen on Friday after the jobs data, where she was quoted as saying that US inflation was still too high and it’s the Fed’s job to reduce it, turned off the initial euphoria.
This was compounded by news of further disruptions in Russian gas supplies in Europe.
“The G7 announced the imposition of an as-yet-unspecified price cap in December on Russia’s oil exports, and Russia shut off Nord Stream 1 gas flows and markets crashed,” wrote Michael Every, global strategist at Rabobank.
“Stocks and bonds were down, but Brent oil was up before breaking off the highs.”
European shares rose 2 percent from six-week lows on Thursday, while Britain’s FTSE jumped 1.9 percent, all before news on energy supplies.
The rally in stock markets helped push the MSCI world stock index up 0.5 percent. However, during the week it suffered a drop of 2.7 percent, which would mark its third consecutive week of losses.
New lockdowns in China had previously fueled concerns about global growth, and high energy costs as a result of the war in Ukraine are weighing on Europe.
“The market is very focused on how aggressive the Fed will be with its rate hike cycle,” said Giles Coghlan, chief currency analyst at HYCM, adding that expectations of higher rates have solidified since a speech last week by the chairman of the Fed. the Fed, Jerome Powell. at the central banking conference in Jackson Hole.
Markets are worried about “China’s slowdown, the eurozone recession and an aggressive Fed,” he said.
Stock funds posted the fourth largest weekly outflow of 2022, while bond funds saw investors withdraw money for the second week in a row, BofA said in a note.