Markets factor in record inflation data, All eyes on the oil price


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Stocks slipped overnight after June inflation data hit its highest level since 1981, adding to growing fears that the Federal Reserve will get more aggressive in its fight to tame rising prices.

Inflation in the US has jumped to a new 41-year-high driven by broad-based price increases in gas, food and rent.

Annual consumer prices rose 9.1 per cent in June from a year ago, up from a 8.6 per cent jump in May, and ahead of economists' expectations of 8.8 per cent – with gas prices at the pump the major reason for the rise in consumer prices.



Energy prices surged 7.5 per cent on the month and are up 41.6 per cent on a 12-month basis.



The inflation data was pretty much factored into market prices, hence such a moot reaction by markets overnight, with Wednesday’s hot CPI reading also prompting questions over whether inflation has in fact reached its peak.
Either way the market is now pricing in an 80 per cent chance of a 100bp hike later this month.

Across the market S&P500 sectors were mixed.

Consumer discretionary rose nearly 0.9 per cent, boosted by gains from Domino’s Pizza, Bath & Body Works and Tesla, while Boeing, Walgreens and United Health slid 2 per cent each, dragging the Dow into negative territory.

Battered tech shares Amazon and Netflix staged a comeback on Wednesday, rising more than 1 per cent each despite mounting growth concerns. The move briefly brought the tech-heavy Nasdaq into positive territory. Twitter’s stock rose nearly 8 per cent as the social media company sued Elon Musk.

Of note, the biotech sector looks to have found a floor with the SPDR S&P biotech ETF outperforming once again, despite negative newsflow, rising for its seventh time in the last eight days. The biotech sector has been one of the worst market performers this year.

There is also much anticipation ahead of tomorrow's unofficial start of Q2 earnings season, with reports from several big banks. The earnings risk theme remains an overhang given the combination of unchanged 2022 and 2023 consensus estimates, growth slowing, lingering inflation pressure and currency pressures.

There’s going to be plenty for the market to focus on moving forward.

The US Dollar was firmer on the yen cross but weaker elsewhere, with the euro earlier falling to parity with the US dollar the for first time since 2002. 

The SPI futures are pointing to a 4 point loss.

Figures around the globe

US markets closed lower. The Dow Jones fell 0.7 per cent to 30,773, the S&P 500 lost 0.5 per cent to 3,802 and the Nasdaq dropped 0.2 per cent to 11,248.

Across the Atlantic, European markets closed lower. Paris fell 0.7 per cent, Frankfurt lost 1.2 per cent and London’s FTSE dropped almost 0.7 per cent.

Asian markets closed mixed. Tokyo’s Nikkei gained 0.5 per cent, Hong Kong’s Hang Seng lost 0.2 per cent and China’s Shanghai Composite added 0.1 per cent.

Yesterday, the Australian sharemarket closed 0.2 per cent or 15 points higher at 6,622.

Ex-dividends

There is one company set to trade without the right to its dividend today. Spheria Emerging Companies (ASX:SEC) is paying 2.2 cents fully franked.

IPOs

There is one company set to make its debut on the ASX today. Keep an eye out for Botala Energy (ASX:BTE), which raised $7 million at 20 cents per share.

Commodities

Iron ore is trading 3.4 per cent higher at US109.40 a ton.

Iron ore futures are pointing to a 1.7 per cent rise.

Gold gained $10.70 or 0.62 per cent to US$1735.50 an ounce.

Silver was up $0.24 or 1.24 per cent to US$19.19 an ounce.

Copper was up $3.45 or 1.05 per cent to US$332.25 a pound.

Oil gained $0.46 or 0.48 per cent to US$96.30 a barrel.

On the London Stock Exchange, Rio gained 0.25 per cent, BP gained 0.04 per cent and Shell added 0.2 per cent.

Currencies

One Australian dollar at 7:10 AM has strengthened slightly compared to the US dollar yesterday, buying 67.66 US cents (Wed: 67.58 US cents), 56.84 Pence Sterling, 92.97 Yen and 67.22 Euro cents.

Over the past 24 hours, Bitcoin added 1.35 per cent to US$19,739.10.

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

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