ASX falls as miners slump, Wall Street sharply lower as US inflation worsens

The Australian sharemarket has fallen in early trade with miners falling sharply while Wall Street dropped to its worst day since July following the latest signal that US inflation is getting worse.

The S&P/ASX 200 was 53.9 points, or 0.6 per cent lower, to 8674, with materials the heaviest weight on the bourse. The ASX lost 0.6 per cent on Wednesday. The Australian dollar was weaker at US69.66¢.

Mining stocks fell sharply with gold prices coming under further pressure and iron ore futures continuing to linger at two-year lows. BHP lost 3.4 per cent, Fortescue fell 1.4 per cent and Rio Tinto shed 2.7 per cent. The price of gold slumped on the US inflation report, reigniting worries that the Federal Reserve will need to raise interest rates further to combat inflation. Northern Star lost 1.9 per cent and Evolution Mining was down 1.8 per cent in early trade.

Financial stocks climbed in early trade, clawing back some of their heavy losses from Wednesday. Commonwealth Bank added 1 per cent, National Australia Bank rose 0.3 per cent, Westpac added 0.5 per cent and ANZ Bank gained 0.7 per cent in early trade.

Energy stocks are steady after oil prices held again as a flare-up in attacks from Russia to the Middle East threatened supply that only recently recovered to near pre-war levels. Santos rose 1.1 per cent in early trade while Woodside Energy dipped 0.2 per cent and refiner Ampol slid 0.1 per cent. West Texas Intermediate held near $US95 a barrel, after rising 1 per cent on Wednesday. Brent settled around $US106.

WiseTech jumped 4.4 per cent after announcing that ASIC had dropped its insider trading investigation into founder Richard White, but the corporate regulator is still pursuing one of the logistics software company’s employees. Technology stocks are largely lower on the back of a slump in tech stocks on Wall Street, with Codan slumping 4.2 per cent while Xero shed 2.4 per cent and Technology One was 1 per cent weaker.

The Australian dollar was trading stronger at US69.75¢ at 10.31am AEDT.

Overnight, the S&P 500 sank 1.1 per cent for a fifth loss in the six days since setting its all-time high. The Dow Jones Industrial Average fell 48 points, or 0.1 per cent, and the Nasdaq composite slid 1.9 per cent as stocks in the artificial-intelligence industry led the way lower.

Stocks felt pressure from rising yields in the bond market, where worries grew after a report said US consumers had to pay prices for fuel, food and other costs of living last month that were 3.7 per cent higher overall than a year earlier. That means inflation accelerated from its 3.4 per cent rate in August and was worse than the 3.6 per cent that economists expected.

Inflation has remained more painful than anyone would like since the economy catapulted out of the crevasse created by the COVID-19 pandemic.

That has added to the longstanding worries about fast-rising debt loads for governments, signals that the US economy is still growing and other factors that have sent bond yields to their highest levels in years.

Traders now see a nearly 35 per cent chance the Fed will raise the federal funds rate at its next meeting in two weeks, up from the 22 per cent probability seen a day earlier, according to data from CME Group.

Part of what’s keeping inflation high is that Americans overall are continuing to spend, which encourages businesses to keep raising prices for their products and services. As Americans become more “price-sensitive” and the economy also benefits from greater productivity by workers, Vanguard Senior Economist Adam Schickling said inflation should slow, but “patience will be required.”

Netflix added 0.2 per cent. The streaming giant announced plans to lay off about 6 per cent of its workforce, amounting to nearly 1000 positions, as it makes wider “organisational changes.”

Much of Wall Street’s pain on Wednesday was due to drops for companies riding the AI frenzy to huge profit growth and stellar stock gains.

Higher bond yields making borrowing money more expensive could make it more difficult for companies to raise cash to build data centres and fill them with AI chips. Drops of 3.2 per cent for Nvidia, 3.1 per cent for Broadcom and 5.7 per cent for Advanced Micro Devices were among the day’s heaviest weights on the S&P 500.

Higher yields in the bond market push downward on prices for all kinds of stocks, and the main way companies can offset that is by delivering bigger profits. That’s exactly what analysts are expecting, and it’s how the S&P 500 has been able to set records despite the many challenges weighing on Wall Street.

But the high expectations also mean companies will likely get punished if they fall short of targets for growth.

Bank of America dropped 4.8 per cent after reporting weaker profit and revenue for the summer than analysts expected. The profit would have failed to meet expectations even if the US Treasury Department had not announced $US1.2 billion ($1.7 billion) in fines earlier this week for alleged violations of anti-money laundering and sanctions laws by the bank.

In stock markets abroad, indexes ticked higher in Europe following a weaker finish in Asia. They rose 0.7 per cent in London and fell 0.9 per cent in Shanghai for two of the world’s bigger moves.

With AP, Bloomberg

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