ASX to slip, Wall Street sinks on US-China tension and economic uncertainty
Australian shares are expected to open lower, as ongoing economic uncertainty and flaring US-China tensions weighed on global market sentiment.
The arrival of US House of Representatives Speaker Nancy Pelosi in Taipei, despite warnings from Beijing, prompted China to launch war planes and buzz the Taiwan Strait in protest.
ASX futures were down 0.3 per cent, to 6,889 points, by 7:20am AEST.
The Australian dollar fell 1.5 per cent, to 69.2 US cents.
Much of those losses happened yesterday, after the Reserve Bank lifted its cash rate target by 0.5 percentage points, which takes the new rate to a six-year high of 1.85 per cent.
The weaker Australian dollar was also driven by a stronger US greenback as investors piled into currencies that are seen as “safe havens”.
In that regard, the Japanese yen jumped 0.9 per cent against the greenback, and was on track for a fifth day of gains, its longest winning streak since 2020.
“There is the uncertainty surrounding Pelosi’s trip to Taiwan and there’s additional data, regarding economic softness,” said Sam Stovall, chief investment strategist of CFRA Research.
“Regarding recession [in the United States], it’s not a question of ‘if’ but ‘when’ and how deep.”
‘An open question’ about further rate hikes
On Wall Street, the S&P 500 slipped by 0.7 per cent, to end the session at 4,091 points.
The Nasdaq declined 0.2 per cent, to 12,349, while Dow Jones index fell 1.2 per cent, to 32,396.
On the economic front, a report from the Labor Department showed job openings in the United States dropped by 5.4 per cent in June, a sign that the job market is weakening amid softening demand.
Since the US Federal Reserve raised interest rates by 0.75 percentage points in July, investors have been speculating about whether the central bank’s largest hikes are already behind it.
“The market has to get really comfortable that they have fully baked in all the Fed’s rate hikes, and I think that remains an open question,” said Rob Haworth, senior investment strategist at US Bank Wealth Management in Seattle.
“The challenges and supply constraints aren’t necessarily done. They aren’t done and gone yet.”
Oil prices slipped ahead of the OPEC+ meeting of oil producers expected this week, the outcome of which could mean a boost to global crude supply, while lingering recession fears helped cap those gains.
Brent crude futures fell 0.4 per cent, to $US99.63 a barrel.
Spot gold dropped 0.7 per cent, to $1,760.24 an ounce.