Traders feel force of stiff US headwinds
The benchmark S&P/ASX 200 Index finished 13.14 points, or 0.3 per cent, lower at 5238.10, while the All Ordinaries dipped 14.9 points, or 0.3 per cent, to 5230.4.
The Fed is widely expected to start reducing its $US85-billion-a-month stimulus to $US75 billion. Much of the trimming is likely to come from purchase of government bonds, rather than mortgage-backed securities, therefore continuing to support the US housing-led recovery.
Macquarie Private Wealth director Martin Lakos said local trade was subdued, with a "a little bit of risk-off mentality coming back into the market".
Emerging market stocks and the Australian dollar, traditionally considered risky assets, have benefited from the Fed pumping trillions of dollars into the US economy to help counter the devastating effects of the financial crisis.
But Mr Lakos said tapering talk was one of three headwinds facing local shares, with all the road bumps coming from the US. The world's biggest economy is quickly approaching its debt limit, with Congress' deadline on raising the limit in the middle of next month.
Mr Lakos said that and speculation on the replacement for Fed chairman Ben Bernanke when his term expires at the end of January next year was sending ripples across markets.
Gold stocks have particularly been thrown about. The precious metal extended losses into a third session on Wednesday, falling more than 1 per cent to less than $US1300 an ounce.
"With the prospect of tapering coming in, we would expect US bond yields to start to go up, albeit modestly. That would add some support for the US dollar and being traded in US dollars, that can't be positive for gold," Mr Lakos said.
The energy sector was the worst performer on the ASX, losing 0.8 per cent, as crude prices fell to a six-week low. Woodside Petroleum eased 0.8 per cent to $38.43, while Origin Energy eased 0.4 per cent to $13.86.
The banks were mixed. CBA and Westpac rose 0.5 per cent to $73.98 and 0.2 per cent to $35.52 respectively, while NAB fell 0.1 per cent to $34.64 and ANZ shed 0.2 per cent to $30.73.
Frequently Asked Questions about this Article…
The S&P/ASX 200 slipped 13.14 points, or 0.3%, to finish at 5,238.10. The All Ordinaries also dipped about 0.3%, down 14.9 points to 5,230.4 as investors turned cautious ahead of key US decisions.
Investors were waiting on the US Federal Reserve’s decision about tapering its stimulus, which created a ‘risk‑off’ tone. Macquarie Private Wealth director Martin Lakos said subdued local trade and three US‑driven headwinds — Fed taper talk, the US debt‑limit deadline and speculation over the next Fed chair — were weighing on markets.
Tapering refers to the Fed reducing its monthly asset purchases — the article said markets expected a cut from US$85 billion to US$75 billion a month. Tapering can push US bond yields modestly higher, strengthen the US dollar and put pressure on riskier assets (like emerging market stocks, the Australian dollar and gold), which can ripple through Australian markets.
Gold extended losses for a third session, falling more than 1% to below US$1,300 an ounce. The article notes gold stocks have been volatile, since expectations of higher US yields and a stronger US dollar tend to be negative for dollar‑priced gold.
The article highlights two US issues: Congress facing a mid‑month deadline to raise the US debt limit, and market speculation about who will replace Fed chair Ben Bernanke when his term ends at the end of January. Both sources of uncertainty are creating market ripples.
The energy sector was the worst performer on the ASX, down about 0.8% as crude oil fell to a six‑week low. Specific stocks mentioned include Woodside Petroleum, which eased 0.8% to $38.43, and Origin Energy, which eased 0.4% to $13.86.
Bank results were mixed: Commonwealth Bank (CBA) rose about 0.5% to $73.98, Westpac gained 0.2% to $35.52, while NAB fell 0.1% to $34.64 and ANZ shed 0.2% to $30.73.
The article points to several US‑linked indicators to watch: the Fed’s taper decision and its composition, US bond yields and the US dollar, the Congressional deadline on the debt limit, speculation around the next Fed chair, plus commodity moves such as crude oil and gold prices — all of which can influence the ASX and the Australian dollar.
Call 1300 880 160
Start a chat
Schedule a call
