ASX falls across the board as Wall Street slumps late

The Australian sharemarket has fallen sharply at the open after Wall Street fell as it contended with the downside of a US economy that keeps powering through its many challenges.

The S&P/ASX 200 was down 82.1 points or 0.9 per cent at the open, with industry sectors in negative territory. The ASX added 0.9 per cent on Wednesday. The Australian dollar is weaker at US69.58¢.

Overnight, the S&P 500 slipped 0.3 per cent to close its third losing month in the last four. The Dow Jones Industrial Average dropped 443 points, or 0.9 per cent, and the Nasdaq composite added 0.2 per cent.

US stocks turned lower after data reports suggested the US economy was even stronger during the spring than earlier thought. That helped yields remain high in the bond market, which in turn kept up the pressure weighing on stocks and all financial markets.

The financial sector was the heaviest weight on the ASX in early trade as the big four banks all fell sharply, with Commonwealth Bank and Westpac down 1.2 per cent while National Australia Bank and ANZ Bank shed 1.4 per cent.

Mining stocks were mixed with BHP up 0.9 per cent while Fortescue fell 0.4 per cent and Rio Tinto lost 1.2 per cent. Gold miners fell with Northern Star down 1.5 per cent and Evolution Mining falling 1.4 per cent as the precious metal swung with softer inflation data tempering bets on further Federal Reserve tightening, while elevated bond yields kept it vulnerable to renewed selling. Bullion fluctuated between a gain of 0.9 per cent and a loss of 0.7 per cent. Traders now price in a roughly 40 per cent chance of a rate increase at the US central bank’s meeting next month.

Energy stocks lost ground after oil prices steadied after gaining in the previous session amid uncertainty over whether a recovery in Middle East flows can be sustained. West Texas Intermediate traded near $US90 ($129) a barrel after rising 1.2 per cent, while the most-active Brent contract settled at about $US98. Woodside Energy dipped 0.6 per cent and Santos lost 0.2 per cent. Ampol fell 1.2 per cent as it announced it had reached a $225 million deal to acquire electric vehicle charging company Evie Networks.

Technology stocks were mixed with WiseTech slipping 0.9 per cent while Codan lost 1.4 per cent, TechnologyOne dipped 0.1 per cent and NEXTDC shed 0.7 per cent. Life360 jumped 3 per cent while Xero added 0.2 per cent.

Overnight, Wall Street’s day began with gains for stocks following an encouraging report that said inflation wasn’t as bad across the US last month as economists expected. It said the cost of living for US consumers was 3.4 per cent higher overall in August than a year earlier. That was not as high as the 3.7 per cent inflation rate that economists expected, even if it remained worse than the Fed’s 2 per cent target.

The report followed others from earlier in the month about inflation during August, but it’s the one that the Federal Reserve prefers to use.

Shorter-term Treasury yields fell as traders pared bets that the Fed will raise its main interest rate next month to get inflation further under control.

That helped the yield on the two-year Treasury briefly fall towards 4.83 per cent before it pulled back to 4.89 per cent, where it was late on Tuesday.

But longer-term yields rose in the bond market. That’s in part because worries about high inflation are just one of the reasons longer-term yields have jumped in the US and around the world.

The seemingly solid US economy is another. Besides Wednesday’s better-than-expected report, another update said growth in business activity in the Midwest was also stronger than economists expected.

Much of the strength in the US economy is due to consumers, who are increasing their spending by more than their incomes are rising.

“The consumer remains resilient, in a much better position than previously thought,” according to Gary Schlossberg, global strategist at Wells Fargo Investment Institute.

Other factors sending Treasury yields higher continue to churn, including worries about the big debt loads that Washington and other governments worldwide are supporting.

The yield on the 10-year Treasury, which is the centrepiece of the bond market, dropped as low as 5.20 per cent in the morning before rising to 5.29 per cent. That’s up from 5.26 per cent, and it’s back to where it was more than two decades ago in 2002.

The 30-year Treasury yield, which takes into account expectations for inflation and economic growth many years down the line, climbed to 5.64 per cent from 5.59 per cent late on Tuesday.

Higher yields slow the overall economy by making borrowing money more expensive for everyone, while undercutting prices for all kinds of investments.

On Wall Street, Cal-Maine Foods dropped 0.7 per cent after the country’s largest egg company reported a larger loss for the latest quarter than analysts expected. With plenty of eggs available in the market, Cal-Maine Foods saw a sharp drop in prices it could charge, compared to a year earlier.

Helping to limit the market’s losses was Hewlett Packard Enterprise, which rose 3.9 per cent. It increased its forecast for revenue from its networking business, which is benefiting from the boom in artificial-intelligence technology.

MongoDB climbed 3.4 per cent after the database company’s board boosted its program to send cash to shareholders by $US1 billion through buybacks of its own stock. That helped MongoDB recover some of its sharp loss from earlier in the week, after it said Chirantan “CJ” Desai was stepping down as chief executive for a senior role at Meta Platforms.

In stock markets abroad, indexes dipped in Europe following a mixed finish in Asia.

AP, Bloomberg

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