ASX opens higher as global stocks fall on recession fears

Australian shares have started the day higher despite global equity markets declining, with European stocks extending losses to a fourth straight session.

The ASX 200 was up 42 points or 0.7 per cent to 6,711 at 10.15am AEDT, with academic (+2pc) and basic materials (+1.5) sectors leading the gains.

At the same time, the Australian dollar was down at 62.96 US cents.

Among the best performers were Johns Lying Group (+6.4pc), Orica (+4.4pc) and Champion Iron (+4.1pc).

However, Sandfire Resources and Ramelius Resources shed more than 2.2 per cent at open.

World equities fall

The MSCI global index of stocks lost ground in a volatile session on Monday, while the dollar gained slightly as investors braced for economic data and earnings season. 

Any lingering hopes that the Federal Reserve could shift to a softer stance toward monetary policy appeared to be extinguished on Friday, as the September jobs report pointed to a persistently tight labour market.

Oil futures sold off and Wall Street’s stock indexes were volatile, while US bond markets were closed for the day for a federal holiday.

Weighing on investor nerves was a Russian missile attack on Ukraine that killed civilians and knocked out power and heat in cites across the country, in apparent revenge strikes for what President Vladimir Putin described as a “terrorist” attack on Russia’s bridge to Crimea.

US investors, anxious about rising interest rates and signs of economic weakness, were cautious ahead of inflation data due out later in the week alongside the start of the third-quarter earnings season.

JPMorgan Chase & Co Chief Executive Jamie Dimon told CNBC the US and the global economy could tip into a recession by the middle of the next year.

Then Fed Vice Chair Lael Brainard said tighter US monetary policy has begun to be felt in an economy that may be slowing faster than expected, but that the full interest rate increases still won’t be apparent for months.

“There’s nothing specific in Brainard’s comments that makes you say the Fed is changing its policy but there’s at least some signs that the Fed is not proceeding blindly on a rate hiking restrictive path,” said Steve Sosnick, chief strategist at interactive brokers in Greenwich Connecticut.

“Dimon’s comments definitely didn’t help. A lacklustre downward market didn’t need those comments. They’ve been balanced out somewhat by Brainard.”

Wall Street ended lower

The Dow Jones Industrial Average fell 93.91 points, or 0.32 per cent, to 29,202.88; the S&P 500 lost 27.27 points, or 0.75 per cent, at 3,612.39; and the Nasdaq Composite dropped 110.30 points, or 1.04 per cent, to 10,542.10.

Nasdaq led the declines as the chip sector sold off sharply after the Biden administration published a sweeping set of export controls on Friday, including a measure to cut off China from certain semiconductors made anywhere in the world with US equipment.

Wall Street had already declined on Friday after the upbeat payrolls report cemented expectations for another large rate hike.

Four of the biggest US banks are expected to kick off the earnings reporting season on Friday, with large lenders expected to report a decline in profits as the economy slowed and volatile markets put the brakes on dealmaking.

The MSCI All-World index ended down 1.0 per cent in its fourth straight day of losses. The pan-European STOXX 600 was down 0.4 per cent, having skimmed one-week lows.

Chicago Fed President Charles Evans also said on Monday that US Fed officials are closely aligned on the need to raise the target policy rate to around 4.5 per cent by early next year, unless data upends current projections.

Minutes of the Fed’s last policy meeting will be published this week and could offer a steer on rate-setters’ thinking about the likely path of monetary policy.

The Bank of England sought to ease concerns about this week’s expiry of its program designed to calm turmoil in the government bond market, announcing new safety-net measures including a doubling of the maximum size of its debt buy-backs.

Oil prices extended losses after settling lower as investors weighed potentially tight supply against economic storm clouds that could foreshadow a global recession and erosion of fuel demand.

Brent crude oil was down, trading at $US95.94 a barrel, by 06:53am AEDT.

Gold prices fell as an elevated dollar and solidifying bets for an aggressive Fed interest rate hike pushed the non-yielding bullion to its lowest level in a week.

Spot gold dropped dropped 1.5 per cent to $US1,669.28 an ounce, by 10:28am AEDT.

ABC/Reuters