Bears weigh on the ASX on Powell’s faster taper comments, Omicron concerns

December 1, 2021 - 2 months ago
Share on twitter
Share on facebook
Share on linkedin
Share on email

The Australian share market is expected to open lower as a retreat in global stock indexes, and energy prices deepened Tuesday, reflecting fears over the spread of the newly-discovered Omicron COVID-19 variant and U.S. rising inflation.

The ASX futures tumbled -46 points or -0.6% to 7,185, while our local currency, the Australian Dollar, is currently buying US$0.7128 (as of writing).

U.S. stocks on Wall Street tumbled Tuesday to close with major losses after the U.S. Federal Reserve Chair Powell signalled a faster conclusion of tapering asset purchases against rising inflation.

In his testimony before the Senate Banking Committee, Powell said, “The economy is very strong and inflationary pressures are high. It is therefore appropriate in my view to consider wrapping up the taper of our asset purchases perhaps a few months sooner”.

Powell said Federal Open Market Committee (FOMC) members would discuss the possibility of concluding tapering quicker at their next meeting on Dec. 14-15.

The FOMC announced after the conclusion of its two-day meeting on Nov. 3 that it will start winding down its $120 billion asset purchases this month, and it is expected to be concluded by mid-2022.

At the finishing bell, on the New York Stock Exchange (NYSE), the blue-chip Dow Jones Industrial Average tumbled -1.86%, or -652.22 points, to 34,483.72.

The broad-based Standard & Poor’s 500 Index fell -1.90%, or -88.27 points, to 4,567.00, while the rich-tech Nasdaq Composite Index dropped -1.55%, or -245.1 points, to 15,537.7.

The US Dollar Index, also known as US DXY, which measures the greenback’s strength against a basket of six rivals, was down -0.5% to 95.88, while the yield on 10-year US Treasury notes fell 5.9% to 1.439%.

Despite earlier gains, precious metals reversed course, with gold losing -0.6% to $1,775 an ounce and silver falling -0.4% to $22.81.

With the potential risk of lower global oil demand due to the spread of the newly-discovered Omicron COVID-19 variant, oil prices were down more than -4%.

The price of Brent crude fell -4.5% to $69.90 per barrel, and U.S. benchmark West Texas Intermediate crude lost -4.5% to $66.64.

Iron ore prices fell -0.9% to US$102.39 a tonne, while cryptocurrencies tumbled after Bitcoin, the world’s largest cryptocurrency by market value, slipped -1% and is trading at US$56,826.10 (as of writing).

Based on the daily technical assessment of the S&P/ASX 200 (XJO), a weaker opening is foreseen, with the support located at 7,220, with 7,175 located firmer beneath.

The resistance is assessed from 7,265 (minor), with 7,290 located firmer above. Reassess from there.

Daily outlook on the benchmark S&P/ASX 200

Share on twitter
Share on facebook
Share on linkedin
Share on email