Commodity prices take a beating: ASX set to fall

US equities were mostly higher in Tuesday trading, finishing well off the session’s worst levels.

Stocks staged an afternoon rally on Tuesday with the tech-heavy Nasdaq Composite climbing 1.75 per cent to 11,322.24 after opening the day sharply lower.

The S&P 500 rose 0.16 per cent to 3,831.39 after being down more than 2 per cent at session lows.

The Dow Jones Industrial Average closed down 129.44 points, or 0.4 per cent, at 30,967.82 but was down more than 700 points earlier.

European markets were sharply lower having followed the US markets’ early lead.

Across the sectors, energy companies had some of the biggest losses as the US oil price fell 9 per cent, with worst-performing industries being oil and gas, drilling and exploration.

The declines in oil prices and energy stocks make sense given that the Federal Reserve has raised interest rates aggressively to fight inflation, with expectations that those moves may well push the economy into a recession.

Stocks tied to economic growth fell sharply on Tuesday, with machinery names Deere and Caterpillar falling 3.2 per cent and 2.5 per cent respectively, while consumer discretionary stocks, which have been among the worst performers in recent weeks, helped the market recover from its lows of the session.

Amazon and Nike gained more than 3 per cent, while Target rose 2.3 per cent.

Cheaper oil prices could be a boost for these stocks as consumers adjust their spending patterns amid high inflation.

As oil prices dived on Tuesday, it seems that traders are now quickly taking off their inflationary positioning as a broad sell-off in commodities reflected fears that an economic downturn and and lockdowns in China could undercut demand.

Mass COVID-19 testing in China stoked fears of potential lockdowns that threaten to deepen cuts to commodity consumption. Shanghai said it would begin new rounds of mass testing of its 25 million residents over a three-day period.

A flight to the US dollar pushed currencies around the world to their lowest levels in years, as economic prospects in Europe and elsewhere darkened under the cloud of soaring energy prices.

The euro neared a 20-year low against the dollar after natural gas and electricity prices surged on the continent. Currency traders fear Europe’s economy may buckle if Russia completely shuts off natural gas as Putin has widened the war from a battlefield war in Ukraine to an economic war in Europe.

Russia has limited gas supplies to Europe via the Nord Stream 1, and has cut gas supplies to Finland, Poland, Bulgaria, Denmark and Germany over a gas-for-rubles payment dispute.

Those actions have stoked fears of a difficult winter in Europe, with authorities in the region now scrambling to fill underground storage with natural gas supplies.

In other commodity overnight moves, contracts, including wheat, silver and copper (down 5 per cent), also declined, knocking the Bloomberg Commodity index 4.5 per cent lower.

In Australia today – given the widespread commodity weakness the SPI futures are pointing to a 1 per cent fall.

Figures around the globe

US markets closed mixed. The Dow Jones fell 0.4 per cent to 30,968, the S&P 500 gained 0.2 per cent to 3,831 and the Nasdaq gained 1.8 per cent to 11,322.

Across the Atlantic, European markets closed lower. Paris fell 2.7 per cent, Frankfurt lost 2.9 per cent and London’s FTSE dropped 2.9 per cent.

Asian markets closed mixed. Tokyo’s Nikkei gained 1 per cent, Hong Kong’s Hang Seng gained 0.1 per cent and China’s Shanghai Composite lost 0.04 per cent.

Yesterday, the Australian sharemarket rose 0.3 per cent to 6,629.

Ex-dividends

There are a number of companies set to trade without the right to a dividend.

Cardno (ASX:CDD) is paying 170 cents unfranked.
GrainCorp (ASX:GNC) is paying 24 cents fully franked.
Thorn Group (ASX:TGA) is paying 1 cent fully franked.

Dividends payable

There is one commpany set to pay eligible shareholders today

Fisher & Paykel Healthcare Corporation (ASX:FPH)

Commodities

Iron ore is trading 4 per cent higher at US$114.30 a ton.

Iron ore futures are pointing to a 0.8 per cent fall.

Gold lost $37.60 or 2.1 per cent to US$1764 an ounce.

Silver was down $0.55 or 2.8 per cent to US$19.12 an ounce.

Oil fell $8.93 or 8.2 per cent to US$99.50 a barrel.

Currencies

One Australian Dollar at 7:30 AM has weakened against the US dollar since yesterday, buying 68.02 US cents (Tue: 68.69 US cents), 56.89 Pence Sterling, 93.39 Yen and 66.23 Euro cents.