Australian sharemarket slides deeper into the red as Fed meets on rates

A broad sell-off on the stock market pushed the leading index into the red for the second day in a row on Wednesday as investors impatiently awaited important news from the US.

The double program consisting of new US inflation data and the US Federal Reserve’s interest rate decision is expected early Thursday (AEST).

By the close of trading, the S&P/ASX200 had fallen 0.5 percent or 39.9 points to 7,715.5, while the All Ordinaries suffered a similar loss, slipping to 7,963.1.

The Australian dollar was at 66.20 US cents at 4:30 p.m.

The US consumer price report for May will be released before trading opens on Thursday, with analysts looking for signs that underlying inflation has eased, increasing the likelihood of a Fed rate cut.

While interest rate futures suggest that the likelihood of the Fed easing monetary policy is close to zero, investors will also be closely monitoring Fed officials’ interest rate forecasts for clues about the future course of rate cuts.

The latest forecasts from March showed that a narrow majority of Fed officials expected three rate cuts by the end of the year. Depending on Thursday’s inflation data, that average is likely to drop to one or two cuts.

“(Fed Chairman) Jerome Powell has made it very clear that the Fed will be data dependent,” said Gemma Dale, head of investor behavior at NabTrade.

“The market’s biggest concern is whether the data will show a significant rebound in inflation.

“It seems that (Powell’s) strong desire not to raise interest rates is only being tested by the data.”

On the ASX, interest-sensitive technology stocks were among the laggards, falling 1 percent. Industry heavyweight Wisetech lost 2.7 percent to $96.93.

Mining stocks also weighed on the index, losing 0.7 percent as iron ore futures traded at $104.75 a tonne on the Singapore exchange, amid continued pessimism about the recovery of China’s ailing real estate sector, a key demand driver for the key steelmaking raw material.

Shares of heavyweight iron ore mining companies closed lower: BHP lost 0.6 percent to $43.50, Fortescue lost 1.3 percent to $23.29 and Rio Tinto lost 1.5 percent to $121.04.

Financial stocks were down 0.4 percent, with CommBank down 0.7 percent to $124.10, NAB down 0.4 percent to $34.74 and ANZ down 0.5 percent to $28.78. Westpac, however, rose slightly, adding 0.1 percent to $26.71.

Energy stocks were the only sector sub-index to rise, gaining one percent. The sector was supported by Woodside, which rose 2.6 percent to $27.79 after analysts at Macquarie upgraded the oil and gas giant’s rating to outperform.

Among individual stocks, shares in auto parts retailer Bapcor were able to extend their price gains following a takeover offer of $1.8 billion from private equity firm Bain Capital. The shares closed up 1 percent at $5.02.

Shares in Supercheap Auto, Rebel Sport and BCF parent Super Retail Group fell 1.1 percent to $13.07 after Fonterra chief executive Judith Swales was named as the new chief executive, replacing Sally Pitkin.

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