ASX set to fall; US markets drift ahead of Fed meeting

A barrel of US crude rose 71 cents to $US91.48 Monday. That’s up from less than $US70 in July. Brent crude, the international standard, rose 0.5 per cent to $US94.43 per barrel.

Higher prices for gasoline and other fuel were a big reason that inflation consumers are feeling accelerated last month to 3.7 per cent from 3.2 per cent.

The rise in fuel prices, along with worries about rates staying higher for longer, have helped push up Treasury yields across the bond market.

The 10-year Treasury yield edged down to 4.31 per cent from 4.33 per cent late Friday. It’s been mostly climbing since sitting around 3.40 per cent in May.

The two-year Treasury yield, which more closely follows expectations for the Fed, held steady a 5.04 per cent.

Worries about a possible recession also continue to hang around, even though they’ve diminished with successive reports showing the economy and job market continue to hum.

One worrying factor is where bond yields are, with two-year and other shorter-term yields continuing to remain higher than longer-term yields. That’s an unusual occurrence that has often preceded recessions in the past.


Another warning signal comes from the leading economic indicators index, which looks at new orders for manufacturers, consumer expectations for business conditions and other factors that could show where the economy is heading.

When its six-month annualised rate-of-change contracts 3 per cent or more, it’s always been associated with a recession, according to Doug Ramsey, chief investment officer of The Leuthold Group.

It’s been 15 months since the most recent such warning of a recession triggered in June 2022. In the past, the longest stretch between such a trigger and a recession was the 16 months before the Great Recession. If this matches that one, it could imply a recession beginning in October, Ramsey says.

On Wall Street, Clorox dropped 2.4 per cent after it said a cybersecurity attack caused widespread disruptions to its business. It’s still measuring the damage, but it said it expects it to be material on upcoming results. Clorox also said it believes the unauthorised activity has been contained.

Ford and General Motors were falling as a limited strike by the United Auto Workers carried into another day. Ford fell 2.1 per cent, and General Motors slipped 1.8 per cent.

Stocks of energy producers, meanwhile, helped to lead the market because of the rise in oil. Exxon Mobil gained 0.8 per cent, and Marathon Petroleum rose 1.6 per cent.

In stock markets abroad, the Hang Seng index in Hong Kong fell 1.4 per cent following reports over the weekend that police had detained staff at the wealth management business of troubled real estate developer China Evergrande.

Indexes fell across much of the rest of Asia, as well as in Europe.


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