The Australian sharemarket experienced a notable downturn at its opening, echoing the global trend triggered by an unexpectedly high US Consumer Price Index (CPI), which dashed hopes for an imminent rate cut by the Federal Reserve. This downturn was mirrored in major US indices, with the Dow, S&P 500, and Nasdaq all registering significant declines, accompanied by a surge in the VIX volatility index and a sharp increase in the yield of the US 10-year note. Concurrently, the Australian dollar depreciated over 1% against the US dollar, while gold dipped below $2000 an ounce and oil briefly surpassed $83 a barrel amidst the prevailing uncertainty. Despite the market turbulence, the CME FedWatch Tool indicated a likelihood of the first rate cut by the Fed in June, although economists remain divided, with some projecting a May adjustment and others suggesting a potential delay until the latter half of 2024. The US CPI’s 0.3% increase last month, with significant contributions from shelter costs, underscored inflationary concerns, particularly as prices excluding food and energy rose by 0.4% in January. Amidst this backdrop, Goldman Sachs anticipates the Federal Open Market Committee to maintain the Fed funds rate in March and initiate an easing cycle in May, contributing to the ongoing uncertainty surrounding monetary policy and market dynamics.
At 11:30am, the S&P/ASX 200 is 1.23 per cent lower at 7,510.00.
The SPI futures are pointing to a fall of 104 points.
Best and worst performers
The best-performing sector is Industrials, up 0.03 per cent. The worst-performing sector is Financials, down 1.9 per cent.
The best-performing large cap is IDP Education (ASX:IEL), trading 10.77 per cent higher at $22.42. It is followed by shares in Seven Group Holdings (ASX:SVW) and Computershare (ASX:CPU).
The worst-performing large cap is Northern Star Resources (ASX:NST), trading 3.87 per cent lower at $12.795. It is followed by shares in SEEK (ASX:SEK) and Newmont Corporation (ASX:NEM).
Commodities and the dollar
Gold is trading at US$2004.40 an ounce.
One Australian dollar is buying 64.53 US cents.