Australian equities have risen sharply in afternoon trading, ahead of the US Federal Reserve’s decision to potentially withdraw some of its COVID-19 stimulus.
- AMP has sold its remaining stake in a life insurance company for $ 524 million
- The Australian dollar has fallen to a low of two weeks
- The prices of iron ore have fallen by 59 per cent. since May
At 1:55 p.m., AEDT, the benchmark ASX 200, rose 74 points (or 1 percent) to 7,398, making up for all of its losses from Tuesday.
Eight out of every 10 shares are traded higher, including AMP (+8.4%), Orocobre (+7.8%), Pilbara Minerals (+5%) and Commonwealth Bank (+1.2%).
The financial services provider AMP said it had agreed to sell its remaining 19 per cent of the shares in Resolution Life’s Australian business to the UK company for $ 524 million.
This marks in particular AMP’s exit from the life insurance industry.
Meanwhile, the CBA said it will partner with a New York-based cryptocurrency exchange and offer its customers the opportunity to trade around 10 different digital currencies through its banking app.
This would make the CBA the first of the major Australian banks to offer crypto services.
On the flip side, Redbubble (-3.6%), Uniti Group (-3.4%), Crown Resorts (-1.2%) and IDP Education (-0.7%) suffered heavy losses.
Australian dollar falls after RBA decision
The Australian dollar fell sharply to 74.28 US cents (down 1.3 per cent), partly due to a stronger dollar.
Its decline also came after Tuesday’s decision by the Reserve Bank, which suggested Australia could experience a rate hike before 2024.
However, the central bank’s guidance was perceived by the market as more “pigeon-like” than expected. RBA Gov. Philip Lowe said the cash rate will not rise until inflation is sustainable within the 2 to 3 percent target.
“Yet the RBA’s ‘patient’ approach to tightening monetary policy and Governor Lowe’s setback on a 2022 rate hike prompted Australian fixed income markets to dampen some tight expectations,” said Commonwealth Bank currency strategist Carol Kong.
“The US dollar could rise further if the FOMC [US Federal Open Market Committee] announces that it will start downsizing its monthly asset purchases by $ 20 billion a month in November compared to expectations of $ 15 billion a month ”.
Iron ore crashes
Australia’s main export, iron ore, also fell sharply – down 7.4 per cent to $ 95.77 per tonne. ton.
The price of steelmaking material has fallen by 59 percent since May (when iron ore prices traded at a record high of $ 233 per tonne).
“Concerns about the prospects for the Chinese real estate market continue to weigh on the iron ore and steel markets,” ANZ economists Brian Martin and Daniel Hynes wrote in a note.
“China appeared to be stepping up efforts to curb steel production, with restrictions now extended to the first quarter of 2022 to ensure less pollution during the Beijing Winter Olympics.
This led to iron ore futures trading below USD100 / h for the first time since mid-2020. “
Wall Street is breaking new records before the Fed’s decision
The US Federal Reserve will announce a statement at the end of its two-day meeting on Thursday (7:00, AEDT), in which it is expected to announce the start of downsizing its bond buying program.
Markets also price an interest rate hike at the Bank of England meeting on Thursday.
Movements higher in the stock markets indicated that concerns about supply chain disruptions and rising inflation are exaggerated, as are concerns about the US Federal Reserve’s downsizing plans, said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.
“These are temporary factors that will resolve themselves,” he added.
“Earnings and revenue continue to surprise upside as this is a very strong economy.”
Wall Street’s main index ended trading at new record highs on Wednesday (local time).
The Dow Jones Industrial Average closed 0.4 percent higher at 36,053. The S&P 500 rose 0.4 percent to 4,631, while the Nasdaq Composite rose 0.3 percent to 15,650.
The STOXX 600 in Europe also posted a record close to strong corporate performance, with France’s CAC 40 index hitting its highest level since 2000.
In the oil markets, Brent oil fell 0.3 percent to $ 84.43 per barrel. barrel.
Spot gold fell 0.3 percent to $ 1,787.76 per ounce.
ABC / Reuters