ASX to fall, Amazon slumps, S&P 500 falls to early June low

The S&P 500 info tech index fell 1.8 per cent on Tuesday, widening its drop from a July peak to 11 per cent, according to Bloomberg.

The Conference Board said its consumer confidence index dropped to 103.0 this month, the lowest reading since May, from an upwardly revised 108.7 in August. Economists polled by Reuters had forecast the index easing to 105.5 from the previously reported 106.1. Consumers’ perceptions of the likelihood of a recession over the next year ticked back up.

The local currency slid 0.4 per cent, trading below US64¢; the Bloomberg dollar spot index advanced 0.3 per cent.

On bitstamp.net, bitcoin was 0.5 per cent to $US26,157 at 7.06am AEST.

The yield on the US 10-year note finished unchanged at 4.54 per cent at 4.59pm in New York.

“Elevated yields will serve as a headwind to equities through the end of the month and perhaps the end of the year,” said Alex McGrath, chief investment officer for NorthEnd Private Wealth.

On Wall Street, volatility surged anew, rising more than 12 per cent to 18.94. Amazon tumbled after it was sued by the US Federal Trade Commission in a long-anticipated antitrust case.

“Exuberant [volatility] is long gone (the gap earlier this month),” themarketear.com said. “VIX has moved sharply higher and is now trading with an ‘inverted’ gap vs the S&P 500. We are not seeing panic yet, but definitely some real fear hitting this market.”

In a tweet, Mohamed El-Erian said: “A leg up in yields that is yet to bring in buyers in sufficient size, year-to-date highs for the #dollar index, and disappointing data are conspiring to intensify the recent pressure on US #stocks.”

In a note, Bank of America’s data analytics team said: “We view last week’s [Fed policy meeting] as corroborating our thesis that, with economic uncertainty so high and policymakers so data-dependent, the Fed would err on the side of doing too much rather than too little – keeping policy tighter for longer until certain that inflation is dead.

“US equities/equity vol, previously pricing in Goldilocks, received a modest wake-up call as a result, but in our view are still underpricing the reality that high economic uncertainty implies higher for longer policy. Case in point: the Nasdaq, and even less AI-exposed Tech stocks like Apple, have until recently posted stellar gains despite US real rates in the midst of a Taper Tantrum-like surge.”

Today’s agenda

Local: August monthly CPI at 11.30am

Overseas data: China August industrial profits at 11.30am; US August durable goods orders at 10.30pm

CPI expectations

TD Securities: “We expect August monthly CPI to edge higher to 5.4 per cent y/y (consensus: 5.2 per cent, Jul: 4.9 per cent), the first re-acceleration in inflation in 7 months. Fuel prices will be a big driver for the jump in inflation in Aug as petrol prices are up 10 per cent m/m while rent inflation is likely to be persistent.

“The other wildcard will be on the electricity price imputation to the CPI given the timing and magnitude of the electricity subsidies across states and how it affects the electricity CPI.

“A big upside surprise in monthly CPI adds scrutiny to the Q3 CPI print out in late October and we can’t discount the odds of an insurance hike in November, especially given the risk of an inflation resurgence after the march higher in commodity and energy prices.”

Other top stories

Business cheers as divisive Andrews bows out early The outgoing Victorian premier’s shock resignation blindsides rival factions allowing his handpicked deputy, Jacinta Allan, to take the reins.

PwC hopes outsiders will cure ‘shadow culture’ PwC Australia will add three independent directors to its governance board in response to a report into the firm’s operations triggered by its tax leaks scandal.

Market highlights

ASX futures down 22 points or 0.3% to 7048 near 7am AEST

• AUD -0.4% to 63.98 US cents
• Bitcoin -0.5% to $US26,157 at 7.06am AEST
• On Wall St: Dow -1.1% S&P -1.5% Nasdaq -1.6%
• In New York: BHP -2% Rio -1.7% Atlassian -2.6%
• Tesla -1.2% Apple -2.3% Amazon -4% NYSE Fang -1.8%
• Stoxx 50 -0.9% FTSE +0.02% CAC -0.7% DAX -1%
• Spot gold -0.9% to $US1899.73/oz at 2.28pm in New York
• Brent crude +0.8% to $US94.04 a barrel
• Iron ore -1% to $US114.95 a tonne
• 10-year yield: US 4.54% Australia 4.40% Germany 2.80%
• US prices as of 4.59pm in New York

United States

OpenAI, the creator of ChatGPT, is talking to investors about a potential share sale that would value the startup at $US80 billion to $US90 billion ($140 billion), the Wall Street Journal reported.

President Joe Biden endorsed the United Auto Workers’ demand for a major wage increase during a visit to a picket line at a General Motors plant in suburban Detroit —- a historic show of solidarity with organised labour.

“Folks, stick with it. Because you deserve the significant raise you need and other benefits,” Biden said Tuesday in Belleville, Michigan, encouraging workers striking against legacy automakers GM, Ford Motor, and Stellantis.

Birkenstock Holding is preparing to kick off the roadshow for its US initial public offering next week in the latest major test of demand for new listings, people with knowledge of the matter told Bloomberg.

The German footwear maker plans to start taking investor orders as early as October 2, the people said, asking not to be identified because the information is private. It’s considering seeking a valuation of $US10 billion or more in the IPO, according to the people.

A report from the Commerce Department showed new home sales plunged 8.7 per cent to a seasonally adjusted annual rate of 675,000 units in August after racing to a 17-month high in July.

Economists had forecast new home sales, which account for a small share of US home sales, falling to a rate of 700,000 units.

A report from the Federal Housing Finance Agency showed annual home price growth quickened for a second straight month in July, largely reflecting the tight supply in the market for previously owned homes. House prices jumped 4.6 per cent on a year-over-year basis in July after rising 3.2 per cent in June. Prices shot up 0.8 per cent month-on-month after advancing 0.4 per cent in June.

The resurgence in house prices was seen feeding through to higher inflation, likely giving the Fed cover to maintain its hawkish posture for some time.

Commodities

Aussie hydrogen exports to Europe could be a pipedream, report warns The Clean Air Task Force says Europe’s best bet is to get hydrogen by pipeline from nearby, or as ammonia from Qatar. But Australia might still get a look-in.