Wall St slips as jobs data dents Federal Reserve deceleration wish, ASX set to open flat

Australian shares are expected to start the day flat as investors closely eye any signals the US Federal Reserve will decrease its rate hike on Thursday.

ASX futures were down 3 points to 6,971 at 6:55am AEDT.

At the same time, the Australian dollar was flat at 63.97 US cents.

Overnight, US stocks closed lower for a second-straight session after data indicating the labour market remained on solid ground dimmed hopes the Federal Reserve might have enough reason to begin decreasing the size of its interest rate hikes.

A survey showed US job openings unexpectedly rose in September, suggesting that demand for labour has remained strong even as the central bank has embarked on a path of aggressive interest rate hikes in an effort to bring down stubbornly high inflation.

Investors have been paying close attention to labour market data for any signs of weakening in the job market, as decreasing wage pressures and easing demand would help reduce inflation, giving the Fed the ammunition it needs to begin decelerating with a 50-basis-point rate hike in December.

Growing expectations the central bank may have enough justification to begin slowing in December — partly due to data pointing to a weakening economy and a corporate earnings season that has been better than expected — helped stocks rally in October, with the Dow notching its biggest monthly percentage gain since 1976.

The sharp focus on labour market data overshadowed another report which showed US manufacturing activity grew at its slowest pace in nearly two and a half years in October as rising interest rates cooled demand for goods and pricing pressures on manufacturers lessened.

“That is the concern for the market … we know the Fed wants to slow down the labour market, they want to slow down hiring so demand drops in the economy, which will help inflation,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan.

“From an employment standpoint, things look really robust though, and that is putting some pressure on stocks.”

According to preliminary data, the S&P 500 lost 16.26 points, or 0.42 per cent to end at 3,855.79 points, while the Nasdaq Composite lost 97.62 points, or 0.90 per cent to 10,889.23. The Dow Jones Industrial Average fell 85.35 points, or 0.26 per cent to 32,647.60.

European shares gained on Tuesday, starting November on an upbeat note amid growing hopes the US Federal Reserve would slow down the pace of its interest rate hikes.

The pan-European STOXX 600 index rose 0.6 per cent to hit a near seven-week closing high, with miners and retailers leading the gains.

On the oil markets, Brent crude oil was up, trading at $US94.56 a barrel by 7:10am AEDT.


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