Higher interest rates impact US markets: Aus shares to drop

Market Reports

by Kathy Skantzos

The US markets fell overnight after hitting record highs in the previous session, which is likely to have a slide affect on the ASX today.

It was the biggest drop for the year so far, with the Dow falling 117 points. This comes after the benchmark 10-year yield broke above 2.7 per cent, the highest reading since April 2014. Higher interest rates are bringing on fears of higher inflation expectations. Utilities, telcos and real estate were some of the worst performers, all negatively affected by higher interest rates. However, Goldman Sachs and Bank of America benefited from the higher rates, and their stocks rose.

In commodities, oil has dropped about a per cent, gold has also fallen, but iron ore is tracking higher.

US economic news

Personal income increased by 0.4 per cent in December, beating market expectations of 0.3 per cent. Spending also increased by 0.4 per cent in December, which was less than the market expected, after an upwardly revised 0.8 per cent increase in November.

The manufacturing Index in Texas rose in January month-on-month to a record since December 2005, beating market expectations, on the back of an increase in shipments and capital expenditures.

Local economic news 

The NAB business confidence survey for December will be out. Recent figures are showing the business sector is in strong shape.

Figures

Wall Street closed lower yesterday: The Dow Jones Industrial Average lost 0.7 per cent to close at 26,439, the S&P 500 lost 0.7 per cent to close at 2,854 and the NASDAQ lost 0.5 per cent to close at 7,467.

European markets closed mixed: London’s FTSE gained 0.1 per cent, Paris lost 0.1 per cent and Frankfurt dropped 0.1 per cent.

Asian markets closed lower: Tokyo’s Nikkei dropped 0.01 per cent, Hong Kong’s Hang Seng dropped 0.6 per cent, and China’s Shanghai Composite fell 0.1 per cent.

And back home, the Australian share market closed higher yesterday: The S&P/ASX 200 Index closed 25 points up to finish at 6,075.

On the futures market the SPI is 27 points down.

Company news

Oil and gas company Strike Energy (ASX:STX) has revised its gas sales agreement with Orora (ORA:ASX) to be more in line with its revised development strategy for the Southern Cooper Basin gas project. The agreement, which was entered into with the packaging company in 2014, has been revised to give Orora the option to purchase 45 petrajoules of gas from the PEL 96 permit area, over a 10 year term commencing on or after 1 January 2020. Ororoa’s option remains conditional on the PEL 96 joint venture making a final investment decision on a commercial project within PEL 96. Shares in Strike Energy (ASX:STX) closed 6.6 per cent higher at $0.08.

Ex-dividends

One company is going ex-dividend today. Aurora Dividend Income Trust (ASX:AOD) is paying 0.32 cents, franked at 37.5 per cent.

Currencies

One Australian Dollar at 8:30AM was buying 80.92 US cents, 57.53 Pence Sterling, 88.19 Yen and 65.38 Euro cents.

Commodities

Gold has lost $13.50 to $US1,344 an ounce.
Silver has lost $0.29 to $US17.15 an ounce.
Oil has lost $0.69 to $US65.45 a barrel.

Cryptocurrencies

Bitcoin has fallen 4 per cent to $11,320.
Ethereum has dropped about 5 per cent to $1,181.
Tether has gained about 0.8 per cent to $1.00.