ASX expected to open lower as Wall Street fears rate hikes

Australian shares are expected to open lower after a weak lead from Wall Street as investors fret over a stubbornly high inflation rate and the prospect of more rate hikes in 2023.

As of 8am this morning, ASX futures were pointing to a decline of 38 points, or 0.54 percent, to 6,953.5.

On Wall Street, shares gave up an early gain and ended lower on Tuesday, a lackluster first trading day of 2023 for Wall Street, just days after it closed the books on its worst year since 2008.

Investors entered 2023 concerned about persistently high inflation rates.

Investors entered 2023 concerned about persistently high inflation rates. Credit:AP

The S&P 500 lost 1 percent gain and closed 0.4 percent lower. The Dow Jones Industrial Average slipped less than 0.1 percent and the Nasdaq Composite fell 0.8 percent. Small company stocks also lost ground, dragging the Russell 2000 Index down 0.6 percent.

Technology stocks were among the largest weights in the market. Apple fell 3.7 percent, leaving its market value below $2 trillion for the first time since March 8, 2021. Shares of the iPhone maker fell nearly 27 percent in 2022, its first annual decline in four years amid a broad decline in tech sector stocks.

Long-term bond yields fell significantly. The 10-year Treasury yield, which drives mortgage rates, fell to 3.77 percent from 3.88 percent late Friday. Stock and bond markets were closed on Monday for the observed New Year holiday.

Investors are entering a new year with the same worries that weighed on markets in 2022, causing the benchmark S&P 500 to plummet nearly 20 percent this year, just the third annual decline since the financial crisis 14 years ago.

“If the market is down 20 percent, things are for sale, 20 percent cheaper,” said Randy Frederick, managing director of trading & derivatives at Charles Schwab. “You’d think people would be willing to come in and buy a little bit if they were long-term oriented. It’s a bit more difficult in the short term.”

Inflation is easing but remains stubbornly hot, prompting the Federal Reserve to continue raising interest rates to slow economic growth. This is bracing Wall Street for the recession and higher unemployment that could result from these policies. ASX expected to open lower as Wall Street fears rate hikes

Brian Lowry

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