US dollar hits parity with euro, RBNZ to lift cash rate, ASX dips
Australian shares have started the day lower after world stocks traded mixed while oil prices dipped.
Key points:
- The ASX 200 has lost 11.4 per cent since the year began
- Overnight, the Dow Jones index lost 0.6 per cent, the S&P 500 dropped 0.9 per cent and the Nasdaq Composite shed 1 per cent
- Meanwhile, the pan-European STOXX 600 index rose 0.5 per cent
The ASX 200 was down 13 points or 0.2 per cent at 6,594, by 10:26am AEST.
At the same time, the Australian dollar was down at 67.44 US cents.
Academic (+1.6pc) and industrials (+1.5pc) sectors were leading the gain at open, while energy (-2.1pc) and basic materials (-1.2pc) were the biggest laggards.
Nononix lost 3.7 per cent, Alumina shed 2.8 per cent and Woodside Energy dropped 2.8 per cent.
The Reserve Bank of New Zealand (RBNZ) is widely expected to raise rates by half a percentage point later today.
The euro rebounded on Tuesday after sliding to a 20-year low and nearing parity against the US dollar as investors worried that an energy crisis in the region would bring on a recession.
By 8:45am AEST, the single currency reached $1 against the greenback, the lowest since December 2002.
“The US economy remains the most resilient relative to the eurozone and others within the G10 universe,” Pepperstone research strategist Luke Suddards said in an analysis.
“The cost-of-living crisis and impact on households seems far more pronounced in Europe and the UK.
“With global recessionary clouds rapidly forming, [the US dollar] is the default portfolio hedge and therefore benefits from safe-haven flows.
“The final push to parity came from fears over gas supplies being turned off in their entirety as the Nord Stream 1 pipeline closes from July 10-21 to undergo maintenance.
“A decisive move below parity could see a wave of forced selling as stop losses are triggered. The trapdoor lower could really open then — 0.95 seems to be the next major level on the downside.”
On oil markets, Brent crude was down, trading at $US99.05 a barrel at 07:01am AEST.
ANZ confirms discussions with KKR
ANZ has confirmed it is in discussions with Kohlberg Kravis Roberts & Co. (KKR) about a potential acquisition of MYOB.
ANZ and KKR are yet to reach agreement in relation to the acquisition and there is no certainty it will proceed.
MYOB is one of Australia’s leading providers of business management, financial and accounting solutions for SMEs, enterprise and accounting practice customers.
Should the transaction proceed, it would be subject to regulatory approvals, including from the Australian Competition and Consumer Commission and the New Zealand Overseas Investments Office.
The bank said it would make an announcement to the market if the negotiations were successfully completed and an agreement was entered into.
Shares of ANZ dropped 0.4 per cent at $22.6 by 10:38am AEST.
Wall Street slumps
Overnight, Wall Street ended in negative territory as growing signs of recession kept buyers out of the equities market ahead of inflation data.
While all three major US stock indexes seesawed between modest gains and losses earlier in the session, they turned sharply lower late in the day as Wednesday’s Consumer Prices report from the Labor Department drew near, with big bank earnings looming later in the week.
“[Investors are] waiting to hear what happens with CPI and earnings,” said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Company, in Milwaukee, Wisconsin.
“For several months we’ve swung back and forth between inflation fears and recession fears, almost on a daily basis.”
“We have really confused investors who have chosen to go on a buyers strike,” Mr Schutte added. “I don’t hear many people saying ‘buy the dip.'”
While the CPI report is expected to show inflation gathered heat in June, the so-called “core” CPI, which strips away volatile food and energy prices, is seen offering further confirmation that inflation has peaked, which could potentially convince the Federal Reserve to ease on its policy tightening in autumn.
Paul Kim, chief executive officer at Simplify ETFs in New York, expects year-on-year topline CPI to “be in the high eight or potentially even nine percentage range, and with inflation that high, the Fed has only one thing in mind.”
Worries that overly aggressive moves by the Fed to reign in decades-high inflation could push the economy over the brink of recession were exacerbated by the steepest inversion of the 2-year and 10-year Treasury yields since at least March 2010, a potential signal of near-term risk and economic contraction.
The market expects the central bank to raise the key Fed funds target rate by 75 basis points at the conclusion of its July policy meeting, which would mark its third consecutive interest rate hike.
The Dow Jones Industrial Average fell 193 points, or 0.6 per cent, to 30,981, the S&P 500 lost 36 points, or 0.9 per cent, to 3,819 and the Nasdaq Composite dropped 108 points, or 1 per cent, to 11,265.
Meanwhile, the pan-European STOXX 600 index rose 0.5 per cent and MSCI’s gauge of stocks across the globe shed 0.2 per cent.
ABC/Reuters
Posted , updated
