USA vs Europe
A speech from Fed Chair Yellen pushed investor concerns towards the impact of rate hikes, overshadowing the potential for the ECB to pull the trigger on further stimulus tonight. With analysts pointing to potential for both rate cuts and significant asset purchases, last night’s sell-off may not see full transmission to Asia Pacific trading. However, weaker commodity prices will likely weigh on Australian resource shares.
Yellen appeared to shift to rate hike messaging 2.0 in a speech last night, suggesting further lifts after an initial move in December will depend on actual rather than trend improvements in inflation. Despite this dovish hue the USD strengthened, possibly reflecting a tinge of ECB expectation. USD strength sparked the commodity market stumble, ahead of a key meeting of OPEC countries on Friday.
Oil prices traded close to the six year low hit in August. A stronger USD and a view that Saudi Arabian oil producers won’t back away from their commitment to increased production prompted weak prices. While a believable decrease in production is not likely, a shift in language could move energy prices. Any bounce may not help Santos shareholders, which this morning announced the clearance of the retail share placement overhang at $4.10, a 20% discount to the share price at the time of the issue announcement.
Frequently Asked Questions about this Article…
Rate hikes by the Federal Reserve can affect everyday investors by influencing borrowing costs, impacting stock market performance, and affecting the value of the US dollar. These changes can alter investment returns and the cost of loans.
The European Central Bank's potential stimulus is significant for investors as it could lead to lower interest rates and increased liquidity in the market, potentially boosting European stocks and affecting global investment strategies.
The US dollar strengthened despite dovish comments from Fed Chair Yellen possibly due to expectations of European Central Bank actions and the overall market sentiment anticipating future rate hikes.
Weaker commodity prices can negatively impact Australian resource shares by reducing the revenue and profitability of companies involved in mining and resource extraction, leading to potential declines in stock prices.
Low oil prices are being driven by a stronger US dollar and the commitment of Saudi Arabian oil producers to maintain high production levels, which increases supply and puts downward pressure on prices.
Changes in OPEC's language regarding production levels could signal potential shifts in supply, which might influence market expectations and lead to fluctuations in energy prices.
The clearance of Santos' retail share placement overhang means that the excess shares have been sold, potentially stabilizing the share price and providing a clearer outlook for investors regarding the company's stock performance.
The retail share placement price is significant for Santos shareholders because it was set at a 20% discount to the share price at the time of the issue announcement, which could affect shareholder value and investment decisions.
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