Markets tumble as Biden's Inflation Reduction Act shakes up global EV industry

Market Reports

by Lauren Hayes

Stocks tumbled Tuesday, building on the previous session’s losses, as fears of a recession gripped Wall Street.

The S&P 500 shed 1.4 per cent, falling for a fourth straight day, while the Nasdaq Composite sank 2 per cent. The Dow dropped 1 per cent, building on a nearly 500-point loss from Monday.

JPMorgan Chase’s CEO Jamie Dimon echoed concerns of a downturn ahead, saying during an interview that inflation would push the economy into a recession. Inflation and its impact on the consumer “may very well derail the economy and cause a mild or hard recession that people worry about,” Dimon said.

The biggest outstanding obstacle to the Federal Reserve’s success in reining in inflation boils down to a numbers problem; there aren’t enough workers in the US.

Labour supply remains stubbornly below pre-pandemic levels, and even as of last month, it continues to shrink, Friday’s November labour report showed. The share of people either working or looking for a job has fallen in each of the past three months, and the overall size of the labour force is back below where it stood in February 2020, despite population growth since then. Nearly 200,000 people left the US workforce in November alone. Simply put, labour supply and demand need to come back into balance to contain wage growth and services inflation.

And in Europe there is growing frustration over the Biden administration’s Inflation Reduction Act, with opposition to the sweeping climate and economic bill. Some analysts fear the disagreement could thrust two of the world’s biggest trading partners into a new economic war. At issue is a portion of the law that offers $369 billion in subsidies and tax breaks to companies that develop green technologies in North America. The fear is that the US act gives US companies an unfair advantage - The Swedish electric vehicle battery maker Northvolt, for example, said it would use an I.R.A. subsidy to relocate some production from Europe to the US. Watch this space - there’s potential for this to escalate into a larger trade conflict.

And in company news Taiwan Semiconductor Manufacturing, the world’s biggest maker of leading-edge computer chips, will announce today that it plans to drastically expand and revamp its factory in Arizona.

The $40 billion initiative — significant enough that President Biden and Tim Cook, Apple’s CEO, will attend a celebration of the announcement — is the latest sign that the business world is trying to reduce the risks that China poses to global supply chains. TSMC could eventually produce chips for iPhones in the US.

Across the sectors, only utilities was spared from the sell off, with energy and consumer communications the big drags.

Oil fell to the lowest level since January extending a downward trend as growing concerns about global demand offset any bullish effects from an EU-led price cap on Russian oil sales.

Media and bank stocks, which tend to suffer during recessions, led the losses. Paramount Global’s CEO warned of lower fourth-quarter advertising revenue sending its shares about 7 per cent lower. Morgan Stanley’s stock slumped amid news it’s planning to cut 2 per cent of its workforce, continuing the recent layoff trend in the sector. Growth-focused technology names like Nvidia, Amazon and Meta Platforms also weighed on the market.


The SPI futures are pointing to a 0.5 per cent fall.


One Australian dollar at 8:10 AM has weakened compared to the US dollar on Monday buying 66.85 US cents (Tue: 66.93 US cents).


Iron ore futures are pointing to a 1.6 per cent gain. Iron ore is 0.1 per cent higher at US$109.70 tonne.

Gold added 0.2 per cent. Silver lost 0.2 per cent. Copper gained 0.7 per cent and oil fell 3.4 per cent.

Figures around the globe

Across the Atlantic, European markets closed lower. Paris fell 0.1 per cent, Frankfurt lost 0.7 per cent and London’s FTSE closed 0.6 per cent lower.

In Asian markets, Tokyo’s Nikkei added 0.2 per cent, Hong Kong’s Hang Seng lost 0.4 per cent and China’s Shanghai Composite closed flat.

Yesterday, the Australian sharemarket lost 0.5 per cent to close at 7291.


Civmec (ASX:CVL) is paying 2 cents fully franked

Dividends payable

Red Hill Minerals (ASX:RHI)
Sunland Group (ASX:SDG)
Cobram Estate Olives (ASX:CBO)

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


The views, opinions or recommendations of the commentators in this presentation are solely those of the author and do not in any way reflect the views, opinions, recommendations, of Sequoia Financial Group Limited ABN 90 091 744 884 and its related bodies corporate (“SEQ”). SEQ makes no representation or warranty with respect to the accuracy, completeness or currency of the content. Any prices published are accurate subject to the time of filming and shouldn’t be relied upon to make a financial decision. Commentators may hold positions in stocks mentioned and companies may pay FNN to produce the content at times. The content is for educational purposes only and does not constitute financial advice. Independent advice should be obtained from an Australian Financial Services Licensee before making investment decisions. To the extent permitted by law, SEQ excludes all liability for any loss or damage arising in any way including by way of negligence.

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