ASX expected to open lower as Wall Street frets rate hikes

Australian shares are expected to open lower after a weak lead in from Wall Street as investors fret over a stubbornly high rate of inflation and prospects of further rate rises in 2023.

ASX futures were pointing to a fall of 38 points, or 0.54 per cent, to 6,953.5 at 8am this morning.

On Wall Street, stocks gave up an early gain and ended lower Tuesday, a lacklustre first trading day of 2023 for Wall Street just days after it closed the books on its worst year since 2008.

The S&P 500 shed a 1 per cent gain and finished 0.4 per cent lower. The Dow Jones Industrial Average slipped less than 0.1 per cent and the Nasdaq composite dropped 0.8 per cent. Small-company stocks also lost ground, pulling the Russell 2000 index 0.6 per cent lower.

Technology stocks were among the biggest weights on the market. Apple fell 3.7 per cent, leaving its market value below $US2 trillion for the first time since March 8, 2021. Shares in the iPhone maker fell nearly 27 per cent in 2022, their first annual decline in four years amid a broad slide in technology sector stocks.

Long-term bond yields fell significantly. The yield on the 10-year Treasury, which influences mortgage rates, fell to 3.77 per cent from 3.88 per cent late Friday. Stock and bond markets were closed Monday for the observed New Year’s Day holiday.

Investors are opening a new year with the same concerns that weighed on markets in 2022, leading the benchmark S&P 500 to plunge nearly 20 per cent for the year, just its third annual decline since the financial crisis 14 years ago.

“With the market down 20 per cent, things are on sale, 20 per cent off,” said Randy Frederick, managing director of trading & derivatives at Charles Schwab. “You’d think people would be willing to come in and buy a little bit, if they’re long-term focused. In the short term, it’s a little bit tougher.”

Inflation is easing, but remains stubbornly hot, which has prompted the Federal Reserve to keep raising interest rates to slow economic growth. That has left Wall Street bracing for the recession and higher unemployment that could result from those policies.