ASX poised for a mixed to a weaker opening as U.S. Fed signals rate hikes could come ‘soon’

January 27, 2022 - 4 months ago
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The Australian share market is poised for a mixed to a weaker opening on Thursday as U.S. stocks tumbled Wednesday, erasing strong gains after the U.S. Federal Reserve announced that it would keep its benchmark overnight interest rate unchanged between 0.00% and 0.25% but signalled an interest rate hike could be coming soon.

The ASX futures lost -46 points or -0.7% to 6,874, while our local currency, the Australian Dollar, is currently buying US$0.7098 (as of writing).

Wall Street ended the day in mixed territory after reversing gains made earlier in the session following the policy update from the U.S. Fed and press conference by U.S. Fed Chairman Jerome Powell, which suggested the Fed would push forward with interest rate hikes.

At the finishing bell, on the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell -129.64 points, or -0.4%, to 34,168.09, while the broad-based Standard & Poor’s 500 Index tumbled -6.52 points, or -0.1%, to 4,349.93, with the broad index now falling in six of the past seven trading days.

Meanwhile, the rich-tech Nasdaq Composite Index eked out a +2.82-point gain, or less than +0.1%, to 13,542.12.

Wednesday’s trading leaves all three major indexes down more than -5% in 2022 so far, with the Nasdaq declining -13%.

U.S. stocks on Wall Street climbed at the start of the New York session but trimmed gains after U.S. Fed Chairman Jerome Powell said the central bank’s rate-setting committee is ready to raise rates at its mid-March meeting.

“With inflation well above 2 per cent and a strong labour market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” the Fed said in a statement.

The bank also noted that it would end tapering, the process of reducing monthly asset purchases, in early March.

The dollar index was up +0.58% to 96.52, while the yield on 10-year US Treasury notes fell 0.93% to 1.853%.

Oil prices continued to rise amid growing tensions in Eastern Europe and the Middle East, fuelling concerns about supply disruptions.
Brent crude increased +1.25% to $88.32 per barrel, and US benchmark West Texas Intermediate crude gained +1.56% to $87.02.

Precious metals were down, with gold losing -1.92% to $1,818.20 per ounce and silver slipping -1.62% to $23.44.

Iron ore prices rose +0.2% at US$138.10 a tonne, while cryptocurrencies gained after Bitcoin, the world’s largest cryptocurrency by market value, rose +3% and is trading at US$36,777.00 (as of writing).

Based on the daily technical assessment of the S&P/ASX 200 (XJO), a mixed opening is foreseen, with the intraday support located at 6,780-90, with 6,740 assessed beneath.

The resistance is assessed from 6,970 (minor), with 7,040-50 located firmer above. Reassess from there.

Daily outlook on the benchmark S&P/ASX 200

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