ASX outperforms despite fallout from US market carnage


Carnage on Wall Street this week, after hotter-than-expected US inflation data shattered hopes that cooling inflation and economic data meant the tightening phases for policy were peaking.

The ASX200 was not immune from the sell-off on Wall Street but was able to “outperform” in a relative sense, falling by only 2.6 per cent compared to the 5.5 per cent fall in the tech-heavy Nasdaq.

Here are the top five things that happened in markets this week:

1. Hot US CPI data sparks fear of huge rate hike

Hotter-than-expected US inflation in August shattered hopes of an imminent deceleration in the pace of the Fed’s tightening cycle.

Higher headline (8.3 per cent v 8.1 per cent expected) and core (6.3 per cent v 6.1 per cent expected) CPI were a surprise, prompting markets to price in a significant probability that the Fed will raise rates by 100-basis points when it meets next week.

2. NZ avoids recession on back of surge in tourists

Following a 0.2 per cent contraction in Q1 as Omicron ripped through the country, the New Zealand economy bounced back in Q2, expanding by 1.7 per cent.

The reopening of borders prompted a boom in tourism and spending across accommodation, dining, sports and other recreational activities.

3. AU unemployment rate lifts to 3.5 per cent

The Australian unemployment rate climbed by 0.1 per cent to 3.5 per cent in August.

The lift in the unemployment rate came about as a 33,500 rise in employment was not enough to offset a 0.2 per cent rise in the participation rate to 66.6 per cent.

4. UK inflation lower than expected

UK CPI surprisingly eased in August, coming in at an annual pace of +9.9 per cent, below the 10.2 per cent expected.

It is a start, but inflation remains too high to talk about peak inflation just yet, or for the Bank of England to slow the pace of its rate hike cycle.

5. Bank of Japan jawbones yen higher

The yen bounced from its lowest level since August 1998 after the Bank of Japan verbally intervened to stop its decline.

Jawboning is often a precursor to intervention and a sign that officials are uncomfortable with the speed of the JPY’s 20 per cent fall against the dollar this year.

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