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ASX to fall as global rates race higher

Timothy MooreBefore the Bell editor

Australian shares are poised to open lower, with global bond yields resetting higher as central bankers press the rate pedal in a bid to check persistent inflation, heightening recession odds.

ASX futures were down 17 points or 0.26 per cent to 6628 near 7am AEST. The S&P/ASX 200 closed down 106 points or 1.6 per cent to 6700.2 on Wednesday.

  • On Wall St: Dow -0.4% S&P 500 -0.8% Nasdaq -1.4%
  • In New York: BHP +2.4% Rio +4% Atlassian -5%
  • Tesla -4.1% Apple -0.6% Amazon -1%

The local currency edged up 0.2 per cent; the Bloomberg dollar spot was little changed.

On, bitcoin was up 2 per cent to $US19,271 at 6.35am AEST.

The yield on the US 10-year note leapt 18 basis points to 3.71 per cent at 4.59pm in New York. The two-year yield was at 4.12 per cent.


Overnight, the Bank of England lifted its key rate by 0.5 per cent, the Swiss National Bank opted for a 0.75 percentage point rise as did South Africa’s central bank.

Those increases came after the Fed’s 0.75 per cent increase and its signal of a fourth consecutive similar move in November.

“Most of these rate hikes around the world are not done yet which means the race to restrictive territory won’t be over until closer to the end of the year,” Oanda’s Edward Moya said in a note.

On Wall Street, all three major benchmarks closed lower amid a late burst of selling. Consumer discretionary again paced losses, leading nine of the S&P 500’s 11 sectors lower. Health care was the biggest advancer.

As of Friday, the S&P 500’s estimated earnings growth for the third quarter is at 5 per cent, according to Refinitiv data. Excluding the energy sector, the growth rate is at -1.7 per cent.


The S&P 500’s forward price-to-earnings ratio, a common metric for valuing stocks, is at 16.8 times earnings - far below the nearly 22 times forward P/E that stocks commanded at the start of the year.

In a note, Fundstrat Global technical strategist Mark Newton said he thinks that there’s a good likelihood that the Nasdaq will retest its June lows, while SPX gets close, before rebounds happen starting the first week of October.

“Overall, markets are growing closer to a low and the risk/reward for shorts is growing sub-par heading into late September. Yet it remains prudent to await more evidence of price and time aligning which likely means buying dips is a couple weeks early.”

Today's agenda

Overseas data: Markit manufacturing and services September preliminary PMIs for Eurozone, the UK and the US

Market highlights


ASX futures down 17 points or 0.26 per cent to 6628 near 7am AEST

  • AUD +0.2% to 66.43 US cents
  • Bitcoin +2% to $US19,271 at 6.35am AEST
  • On Wall St: Dow -0.4% S&P 500 -0.8% Nasdaq -1.4%
  • In New York: BHP +2.4% Rio +4% Atlassian -5%
  • Tesla -4.1% Apple -0.6% Amazon -1%
  • In Europe: Stoxx 50 -1.9% FTSE -1.1% CAC -1.9% DAX -1.8%
  • Spot gold -0.1% to $US1673.08/0z at 1.58pm New York time
  • Brent crude +0.9% to $US90.59 a barrel
  • Iron ore +2.4% to $US98.75 a tonne
  • 10-year yield: US 3.71% Australia 3.66% Germany 1.96%
  • US prices as of 4.59pm in New York

United States

The S&P 500 could be poised for more downside after breaking through a rare technical indicator, according to Berenberg strategists including Jonathan Stubbs.

It has traded below its 200-day moving average for over 100 sessions -- a streak that was previously breached only during the tech bubble and the global financial crisis in the past 30 years.

In both of those instances, the gauge posted most of its losses after surpassing that level, with the index declining by a further 50 per cent in 2000-2003 and 40 per cent in 2008-2009 before troughing, they said.


Evercore’s chief equity and quantitative strategist Julian Emanuel cut his S&P 500 year-end projection to 3,975 from 4,200 and expects a “full retest” of the June low in the weeks ahead. The target cut accounts for a rising probability of a recession.


European shares slumped 1.8 per cent on Thursday, as recession worries heightened.

The pan-European STOXX 600 index hit its lowest since February 2021 led by rate-sensitive tech and real estate stocks which fell more than 4 per cent each, with the latter hitting over two-year lows.

Data on Thursday showed euro zone consumer confidence fell by a more than expected 3.8 points in September from August.


“In the very short term we are very bearish on euro zone stocks... because they have big risks during the winter in terms of energy and geopolitics,” said Xavier Chapard, strategist at La Banque Postale Asset Management.

London’s FTSE 100 index dropped 1.1 per cent after the Bank of England hiked rate by 50 bps and said it would continue to “respond forcefully, as necessary” to inflation, despite the economy entering recession.

Travel and leisure stocks slid 3.2 per cent, with French hotel group Accor tumbling 6.9 per cent after J.P.Morgan downgraded to “underweight” on concerns about profitability.

Switzerland’s SMI Index fell 1.3 per cent on Thursday at the lowest level since November 2020, bringing the decline from the December record high to 21 per cent and entering a technical bear market.


Despite Swiss stocks’ haven-like reputation, the index has been weighed down by growth stocks’ getting hit amid widespread pessimism around rate hikes and rising bond yields. The biggest decliners this year include Roche Holding AG, Nestle SA and Sika AG.

While banks usually benefit from a higher rates environment, Credit Suisse Group AG’s hurdles have also weighed on the index, with the stock hitting a record low today on a report that it’s weighing an exit of the US market as one of various scenarios for a strategic revamp.


Fitch Solutions on Tesla’s lithium bet: ”Tesla’s plan to construct a lithium refining site in the US represents an important shift in automakers’ upstream strategy within the EV supply chain. We expect to see additional automakers looking to vertically integrate their upstream operations in the EV supply chain by also onshoring or nearshoring refining facilities, particularly in North America and Europe, where refining capacity is low.

“We believe that the main concern underpinning Tesla’s refining project is to secure a cost-effective, long-term source of refined lithium close to Tesla’s North American Gigafactories, confirmed by the surge of lithium prices to record highs in September 2022.”

Timothy Moore writes on monetary policy, equities, commodities and currencies. He is the overnight markets editor and writes Before the Bell. Connect with Timothy on Twitter. Email Timothy at [email protected]

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