A cautious statement from the US central bank overnight led to a wobbly start to trade.
Three of the big four banks are down, with Westpac and the Commonwealth Bank off by more than one per cent.
However the miners are helping keep the market afloat, after overnight lifts in commodity prices.
Fortescue has lifted six per cent, Rio Tinto bumped up more than two per cent and BHP is 0.8 per cent higher.
In other equities news, Slater and Gordon shares have plunged 14 per cent after the law firm said it would delay its next market cashflow update.
Shares in jewellery retailer Lovisa have also lost more than a third of their value off a lacklustre earnings guidance.
At 8.52am (AEDT) on Thursday, the local unit was trading at 70.27 US cents, hardly changed from 70.29 cents on Wednesday.
And the Australian share market looks set to open lower following falls on Wall Street after the US Federal Reserve failed to give investors a strong indication of when it might scale back future interest rate rises.
The share price futures index was DOWN 30 points at 4,885.
At 7am (AEDT) on Thursday, the local unit was trading at 70.22 US cents, down from 70.29 cents on Wednesday.
The week-old rebound in risk appetite continued overnight, helping risk currencies like the Aussie as well as equities, commodities and interest rates to rise, Westpac strategist Imre Speizer said.
“The Australian dollar was the standout performer, thanks to its stronger-than-expected inflation data yesterday,” he said.
The price of Australian consumer goods and services rose 0.4 per cent in the three months to December, marginally beating expectations and taking the annual rate of inflation to 1.7 per cent.
The currency jumped to a three-week high on the figures, but is losing steam after the Fed left its key overnight lending rate unchanged at 0.25 per cent to 0.50 per cent.
The central bank shifted its language in a more dovish direction, slightly downgrading its growth and inflation outlooks, Mr Speizer said.
“Against that, improvement in the labour market was noted,” he said.
At 6.45am (AEDT) on Thursday, the share price futures index was DOWN eight points at 4,907.
Locally, in economic news on Thursday, the Australian Bureau of Statistics is due to release the international trade price indexes for the December quarter.
In equities news, Energy Resources of Australia is slated to post half year financial results, and Fortescue Metals is expected to release its December quarter production report.
Australian Pharmaceutical Industries has its annual general meeting scheduled in Sydney, while M2 Group has its scheme meeting on the Vocus Communications offer in Melbourne.
In Australia, the market on Wednesday snapped a three-day winning streak as investors retreated on further falls in oil prices and a Chinese market plunge.
The benchmark S&P/ASX200 index was down 60.2 points, or 1.2 per cent, at 4,946.4 points.
The broader All Ordinaries index fell 56.3 points, or 1.1 per cent, to 5,000.8 points.
The Dow Jones Industrial Average is DOWN 68.89 points at 16,098.34 in afternoon trading in New York, while the Standard & Poor’s 500 index is DOWN 6.63 points at 1,897.00.
The NASDAQ Composite index is DOWN 47.73 points at 4,519.95.
The Australian dollar is trading at 70.28 US cents, VIRTUALLY UNCHANGED from 70.29 at Wednesday’s close.
The local currency is worth 83.45 Japanese yen, 64.43 euro cents, 49.32 British pence and 1.0837 New Zealand dollars.
Benchmark crude oil is UP 50 US cents at $US31.95 per barrel.
The Australia market is set to open LOWER, with the SPI futures index DOWN eight points at 4,907.
The benchmark S&P/ASX200 index on Wednesday SHED 60.2 points, or 1.2 per cent, to 4,946.4 points.
The broader All Ordinaries index was DOWN 56.3 points, or 1.1 per cent, at 5,000.8 points.
The spot price of gold is $US1,122.40, DOWN from Wednesday’s close of $US1,120.41.
NEW YORK – Wall Street has erased gains and has fallen after the US Federal Reserve failed to satisfy investors hoping for a stronger sign it might scale back future interest rate rises.
In a widely expected decision, the Fed kept interest rates unchanged and it said it was “closely monitoring” global economic and financial developments, but it maintained an otherwise upbeat view of the US economy.
“Markets across the globe do not think it was prudent for the Fed to raise rates last month,” said Adam Sarhan, CEO of Sarhan Capital.
“The fact that the Fed is now starting to raise rates clearly shows you they are disconnected from what is actually happening on the ground.”
Major stock indexes reversed earlier gains and moved lower.
In late afternoon trading, at 0645 Thursday AEDT, the Dow Jones industrial average was down 0.89 per cent at 16,023.83 points while the S&P 500 had lost 0.11 per cent to 1,901.45.
The Nasdaq Composite dropped 1.57 per cent to 4,496.16.
LONDON – Britain’s blue-chip share index has been led higher by software firm Sage Group and a rebound in the oil price, easing pressure on mining and energy stocks from worries about ample supplies and low demand.
Sage shares rose 7.5 per cent on Wednesday, the top gainer on the FTSE 100 index, after it said its business remained on track after solid first quarter results.
“We see a lot of juice left to squeeze out of this orange, and the right team in charge to do it,” analysts at Investec said in a note, although they added that the share price was already relatively high.
The UK oil and gas index was up 2.6 per cent after US data showed a jump in weekly demand for products such as heating oil when a cold front hit.
Oil prices advanced over $US32 ($A45.63) a barrel although investors cautioned that the rise might not be sustained.
The mining index rose 1.9 per cent with Glencore , BHP Billiton and Anglo American gaining 0.2 to 5.7 per cent.
“Equities have now become even more strongly correlated to commodity prices. Commodities stocks are expected to remain under selling pressure as the weakness in metals and oil prices is not seen disappearing soon,” said Jawaid Afsar, senior trader at Securequity.
Some investors hoped the US Federal Reserve would leave interest rates unchanged following a two-day meeting that began on Tuesday.
“All eyes (will be) on … the Fed release to see if they’re going to be taking a more dovish stance, in which case a slightly weaker dollar could see some respite for commodity-related entities,” Dafydd Davies, partner at Charles Hanover Investments, said.
HONG KONG – Asian and particularly Chinese bourses ended stronger.
There was still some grogginess after gadget giant Apple forecast its first revenue drop in 13 years on Tuesday, but the main pressure was once again from oil which sank back towards $US30 ($A42.78) a barrel following its latest attempt at a bounce.
“(Markets are) pretty much treading water ahead of the FOMC (Federal Reserve),” said Societe Generale strategist Alvin Tan.
“We are expecting a somewhat more dovish tone considering the turbulence in global markets since the start of the year.”
US Treasury yields nudged down, with the benchmark 10-year Treasury note yield dipping about two basis points overnight to 1.9941. The more interest-rate-sensitive two-year yield hovered at 0.8567.
A late rally in China reversed an early three per cent drop and helped MSCI’s broadest index of Asia-Pacific shares outside Japan finish 0.5 per cent higher.
Tokyo’s Nikkei closed up 2.7 per cent.
Valuations have taken a beating in Asia this year.
The benchmark Hong Kong stock market index is now trading at a price-to-earnings multiple of 7.4 times, its lowest since the 2008 crisis, while the China enterprises index is at a multiple of less than six times, its cheapest since December 2001.
“The Hang Seng China Enterprises index is currently priced for a credit event, which we think is slightly extreme,” said Michelle Leung, CEO of Xingtai Capital Management, a hedge fund focused on Chinese consumer stocks.
WELLINGTON – The S&P/NZX 50 Index decreased 0.2 points and was almost unchanged at 6148.43.
ENERGY
Oil futures have clung to earlier gains, brushing off the Fed Reserve’s more cautious outlook since its December policy meeting when the central bank raised rates for the first time in nearly a decade.
Prior to the FOMC statement, oil prices rebounded following data showing a jump in weekly demand for products such as heating oil when a cold front hit the country. News Russia was discussing a possible pact with OPEC temporarily pushed Brent prices above $US33 a barrel.
PRECIOUS METALS
Gold has turned positive and has risen to a 12-week high, after the US Federal Reserve said it was “closely monitoring” global economic and financial developments, and held interest rates steady as expected.
The central bank removed a previous reference from its statement to the risks of the economic outlook being balanced and said it was weighing how the global economy and financial markets could affect the outlook.
“Gold has risen to highs of this rally as the FOMC provided a perfunctory yet cordial nod to doves by removing ‘risks are balanced’ and acknowledging market conditions,” said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.
“For gold bulls, it is an invitation to push gold higher before the next major hurdle which is the February employment report.”
BASE METALS
Copper has hit a two-and-a-half-week high as oil prices jump, tempting investors to buy back short positions, though some caution prevailed ahead of a Federal Reserve policy meeting.
Oil rose five per cent after Russia said co-operation with major oil producers was discussed and US data showed a surprise spike in demand.
“We’re seeing a short covering rally. Copper seems to be tied up with oil,” said Mitsui Bussan Commodities analyst Justin Lennon.
He added, however: “(It) has room to the downside in the first quarter, there’s not yet enough incentive to cut (more) output (and) China’s economy is still struggling.
ASX stocks to watch Thursday, January 28
API – AUSTRALIAN PHARMACEUTICAL INDUSTRIES
Australian Pharmaceutical Industries has its annual general meeting scheduled in Sydney.
BHP – BHP BILLITON
FMG – FORTESCUE METALS GROUP
RIO – RIO TINTO
Mining company shares might lift on Thursday after the price of iron ore rose 50 US cents to be back above $US41.
ERA – ENERGY RESOURCES OF AUSTRALIA-
Energy Resources of Australia is slated to post half year financial results.
FMG – FORTESCUE METALS GROUP
Fortescue Metals is expected to release its December quarter production report.
ORG – ORIGIN ENERGY
OSH – OILSEARCH
STO – SANTOS
WPL – WOODSIDE PETROLEUM
Energy companies are likely to gain after a rise in oil prices.
AAP
