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Chapter 1: What is the main topic discussed in this episode?
A listener production.
US stocks and bonds slide as the Fed signals rates may rise. Oil rebounds on Iran deal uncertainty. And we look at what's in store for our local share market today. Hello, good morning.
Chapter 2: What impact does the Federal Reserve's signal have on US stocks and bonds?
I'm James Gruber. It's Thursday, the 18th of June. This is the morning edition of the ComSec Market Update. Well, it was all about the US Federal Reserve overnight that new Fed Chair Kevin Walsh led his first meeting, having taken over from Jerome Powell. And, as expected, the Fed left interest rates unchanged at the 3.0% to 3.75% range.
However, unexpectedly, the central bank released quarterly projections which showed the majority of Fed officials now anticipate a rate hike by the end of this year.
Chapter 3: How are oil prices affected by the uncertainty surrounding the Iran deal?
Previously, markets had assumed the Fed would hold rates steady given inflationary pressures from the war. That news from the Fed sent US stocks and bonds tumbling and the US dollar soaring. Let's take a deeper look at what's happened with Aussie futures, commodities and currencies. The ASX is poised to open lower, with index futures down 0.8%.
Chapter 4: What is the outlook for the Australian share market today?
As for the ASX 200 yesterday, it ended 0.5% higher, at $8,966. It rose for a fourth straight session to close at its highest in more than two months, led by miners and banks after details of an interim deal to end the Middle East war lifted investor sentiment. Today, energy shares may benefit from the rebound in oil prices overnight, and companies with large U.S.
exposures such as CSL, Aristocrat, ResMed and James Hardy could gain as investors position for higher U.S. rates and a higher U.S. dollar. That's because these companies generate revenue in US dollars and a lower Aussie dollar means that each US dollar earned converts into a higher amount of Australian dollars when they report their financial results.
On commodity markets, global oil prices climbed after US President Donald Trump said the new ceasefire agreement with Iran was not final. and the Iran war could resume if he's unsatisfied, but concerns over excess supply next year limited the gains. The International Energy Agency said U.S.
crude oil inventories fell for a 10th straight week last week as demand surged, pushing total stockpiles to their lowest level since 1985. Brent crude futures settled 0.7% higher at US$79.55 a barrel. Base metal prices were mixed. Copper futures were little changed, down 0.1%, while aluminium futures advanced 0.8% as bargain hunters stepped in following recent falls.
Gold futures ticked up after the Federal Reserve meeting. The futures settled 0.6% higher at US$4,381 an ounce. Meantime, iron ore futures fell 0.4% as heavy rains in China tempered demand for both steel and steelmaking ingredients. Let's now take a look at currencies. They were lower against the US dollar as traders positioned for higher US interest rates. The euro fell 1% to 1.1496 US dollars.
The Japanese yen slipped 0.2% to 160.73 yen. And the Aussie dollar dropped 0.8% to 70.12 US cents. Let's head to Wall Street now. The Dow Jones Index finished down 1%, the S&P 500 dipped 1.2%, and the NASDAQ lost 1.3%. A closer look at the trading day there. US share markets fell after the Federal Reserve left interest rates unchanged, as expected, but signaled a rate hike later this year.
All 11 S&P 500 sectors sank, with communication services and consumer discretionary down the most. declining 3% and 2.7% respectively. The semiconductor index was the one bright spot, rising 1.4%, with Broadcom up 4.3% and Intel jumping 3.5%. Among individual stocks, Robinhood rose 9% after the online trading platform cut 10% of its workforce.
CME Group slipped 3.5% after the exchange operator said its CEO Terry Duffy will step down on March 1 and transition to the role of executive chairman. Shares of Allbird soared 39% after the footwear maker-turned-AI company changed its name to Smartbird. and appointed a former Amazon executive as CEO. Meantime, U.S.
government bonds leapt higher after the Federal Reserve signaled higher rates are ahead and retail sales came in stronger than expected. Retail sales jumped 0.9% last month, well above forecasts. The U.S. 10-year Treasury yield rose 7 points to 4.50%, while the U.S. 2-year Treasury yield soared 17 points to 4.22%.
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