Dark clouds are far from clear for the ASX

May 12, 2022 - 2 weeks ago
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The stage is set for a weaker opening for the Australian sharemarket Thursday as dark clouds are far from clearing over the global markets as disappointing U.S. inflation data failed to soften the outlook for higher U.S. interest rates.

The ASX futures tumbled -35 points or -0.5% to 7,010, while our local currency, the Australian Dollar, is currently buying US$0.6935 (as of writing).

However, it is assessed that the rebound in the commodity markets may cushion the ASX decline as energy and materials sectors are expected to rise as iron ore, crude and metals rebounded.

On Wednesday, the global markets displayed a volatile session, as the U.S. consumer inflation data still holds around its record annual gain of 8.5% posted in March — the largest increase in more than 40 years.

In the U.S. Consumer Price Index (CPI), the annual pace of headline inflation fell to 8.3% in April from 8.5% in March, according to highly-anticipated U.S. Bureau of Labour Statistics data published Wednesday.

That was above the expected decline to 8.1% YoY.

The MoM pace of headline inflation fell to 0.3% in April from 1.2% in March, above the expected drop to 0.2%.

Core Consumer Price Index (CPI), a measure of core inflation, also exceeded expectations.

The YoY rate clocked 6.2%, below March’s 6.5%, but above the expected drop to 6.0%, while the MoM saw a larger than expected jump to 0.6% from 0.3% in March versus the forecast of 0.4%.

Wall Street’s main indexes ended lower at the finishing bell, on the New York Stock Exchange (NYSE), with the blue-chip Dow Jones Industrial Average falling -326.63, or -1%, to 31,834.11, and marking its largest five-day percentage decline in nearly two years.

The broad-based Standard & Poor’s 500 Index lost -65.87 points, or -1.6%, to close at 3,935.18, while, the rich-tech Nasdaq Composite Index tumbled -373.43 or – 3.18% to 11,364.24, its lowest close since November 2020.

The US dollar index (US DXY), which tracks the greenback against a basket of its peers, rose +0.1% to 104.10.

Precious metals rebounded, with spot gold adding +0.8% to $1,854.10 an ounce, and silver rose by +1.4% to $21.50.

Global oil benchmark Brent crude was trading at $108.09 for a +5.4% daily gain, while the U.S. benchmark West Texas Intermediate (WTI) was at $106.22 – a +6.5% increase.

Iron ore prices rose by +4.2% to US$133.50 a tonne, while cryptocurrencies Bitcoin, the world’s largest cryptocurrency by market value, erased its previous day’s gains and plunged to an intraday low of US$27,628.00 and now hovers around its lowest level in 16 months as it currently trades at US$28,700.00 (as of writing).

Based on the daily technical assessment of the S&P/ASX 200 (XJO), a weaker opening is foreseen, with the intraday support located at 7,020 minor, with 6,970 viewed beneath. Reassess from there, as little support is viewed until 6,800-30.

Assessing the topside, the resistance is seen at 7,080 minor, with 7,145 located above. Reassess from there.

Daily outlook on the benchmark S&P/ASX 200

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