(SYDNEY, AUSTRALIA) – Australian shares closed out their worst week since April. Financial stocks dipped and miners fell. The energy sector slipped on Friday but still gained 2.8 percent for the week on the back of strong oil prices.
Hopes for a deal to reopen the Strait of Hormuz faded. United States officials have said the naval blockade of Iran could continue for an open ended period. The move signals a shift from military pressure to economic isolation.
Utilities, healthcare and information technology stocks were the only other segments to improve over the week. Each benefited from dip buying, defensive inflows and company level earnings beats. Consumer facing stocks came under pressure as macroeconomic worries weighed on spending expectations. Both staples and cyclical stocks have held on to most of their gains since May.
BHP will report full year results on Tuesday. CSL, Cochlear and Pro Medicus will also hand down results.
JB Hi-Fi, Temple & Webster, Breville, Super Retail and Zip Co will share their financial scorecards next week. The reports will offer more clues about how consumer confidence is tracking.
Other companies reporting include BlueScope Steel, GPT Group, Lendlease, Goodman Group, Santos, Charter Hall, Northern Star, Whitehaven Coal, Vicinity Centres, Dexus, Inghams and Telix Pharmaceuticals.
Investors will watch Wednesday’s wage price index data and Thursday’s employment figures. The Australian dollar is buying 70.68 US cents, up from 70.45 US cents. A softening United States interest rate outlook is keeping the greenback in check against most major currencies.
Overnight in the United States, the S&P 500 climbed 0.7 percent and topped its prior record set last week. The Dow Jones Industrial Average added 69 points, or 0.1 percent. The Nasdaq composite gained 0.8 percent.
Wall Street relaxed after a report showed prices at the United States wholesale level were 4.7 percent higher last month than a year earlier. The figure is worse than many would like but not as bad as June’s 5.5 percent wholesale inflation rate. It was also slightly better than economists expected.
Back to back benign inflation reports are easing pressure on the Federal Reserve to tighten policy at its meeting next month. Last week’s jobs report was softer than expected. Oil prices have also pulled back. The lack of a deal in the Middle East remains a concern. Equity traders are also focusing on a revival in the artificial intelligence trade after a selloff in semiconductor stocks in July.
Stephen Juneau is an economist at BofA Securities. He said the next round of data in September and the lead up to the meeting will be critical. The market has started to discount hikes more and more because recent data has been more dovish.
Federal Reserve officials are split on whether they should have already begun raising interest rates. Thursday’s report followed a similar update on consumer inflation the day before. Traders are now betting on just a 35 percent chance that the Federal Reserve will raise the federal funds rate at its next meeting in September. This is down from roughly 50 percent two days ago according to data from CME Group.
Any increase by the Federal Reserve would be the first in more than three years. It could also anger President Donald Trump, who has been lobbying for lower interest rates.
Treasury yields fell in the bond market. This eases pressure on stocks and other investments. The yield on the 10 year Treasury fell to 4.65 percent from 4.68 percent late Wednesday and from 4.72 percent on Monday. The yield is still well above its 3.97 percent level from before the war with Iran sent oil and petrol prices surging.