All eyes on commodity prices as interest rate hikes bite: Aus shares to open flat

Market Reports

by Tim McGowen

The ASX will take its lead from Europe today as the US markets were closed for the 4th of July holiday.

Across the Atlantic, European markets closed mixed. Paris added 0.4 per cent, Frankfurt lost 0.3 per cent and London’s FTSE closed 0.9 per cent higher.

US equity futures on Monday are pointing to a 0.7 per cent fall across all US indexes ahead of Tuesday’s re-opening.

In Australia today eyes of course will be on the RBA, with expectations of a 50 bps rate hike at 2.30pm today -- taking the cash rate to 1.35 per cent.

Looking ahead, investors are focusing on commodity pricing as a signal that rising rates may be having an immediate effect on commodities -- long considered the ideal inflation hedge.

Oil rose $2.23 or 2.1 per cent to US$110.66 a barrel --  remaining more than 40 per cent above its level from the start of this year, with natural gas prices up more than 60 per cent this year before falling back to close the quarter 3.9 per cent lower.

Pricing of course for oil and gas remains supported by western nations imposing sanctions on major producer Russia.

A slide in all manner of raw-materials prices -- corn, wheat, copper and more -- is stirring hopes that a significant source of inflationary pressure might be starting to ease.

Wheat, corn and soybeans all wound up cheaper than they were at the end of March. Cotton unravelled, losing more than a third of its price since early May.

Benchmark prices for building materials copper and lumber dropped 22 per cent and 31 per cent, respectively, while a basket of industrial metals that trade in London had its worst quarter since the 2008 financial crisis.

Some investors are starting to view the reversals as a sign that the Federal Reserve’s efforts to slow the economy are reducing demand.

Traders and analysts say that some of the decline in commodity prices can be traced to the retreat of investors who piled into markets for fuel, metals and crops to hedge against inflation.

A JPMorgan Chase & Co commodity strategist said about $15 billion moved out of commodity futures markets during the week ended June 24. 

It was the fourth straight week of outflows and brought to about $125 billion the total that has been pulled from commodities this year, a seasonal record that tops even the exodus in 2020 as economies closed. 

The SPI futures are pointing to a flat open.

Figures around the globe

Asian markets closed mixed. Tokyo’s Nikkei added 0.8 per cent, Hong Kong’s Hang Seng lost 0.1 per cent and China’s Shanghai Composite added 0.5 per cent.

Yesterday, the Australian sharemarket rose 1.1 per cent to 6,613.

Ex-dividends

There are three companies set to trade without the right to a dividend.

Ardent Leisuere Group (ASX:ALG) is paying 48.93 cents unfranked.
Clime Capital (ASX:CAM) is paying 1.28 cents fully franked.
Eildon Capital Group (ASX:EDC) is paying 1.5 cents unfranked.

Dividends payable

There are a number of companies set to pay eligible shareholders today.

Chimera Investment Corporation (ASX:CIM)
Incitec Pivot (ASX:IPL)
National Australia Bank (ASX:NAB)
Peet Limited Bonds (ASX:PPCHB)
Qube Subordinated Notes (ASX:QUBHA)

Commodities

Iron ore is trading 5.6 per cent lower at US$109.90 a ton.

Iron ore futures are pointing to a 0.8 per cent rise.

Gold gained $6.80 or 0.4 per cent to US$1808 an ounce.

Silver was up $0.27 or 1.4 per cent to US$19.93 an ounce.

Oil rose $2.23 or 2.1 per cent to US$110.66 a barrel.

On the London Stock Exchange, Rio gained 0.01 per cent, BP gained 4.41 per cent and Shell added 3.87 per cent.

Currencies

One Australian Dollar at 7:10 AM has strengthened since yesterday, buying 68.69 US cents (Mon: 68.16 US cents), 56.75 Pence Sterling, 93.14 Yen and 65.90 Euro cents.

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