Invest
Markets succumb to jitters as US CPI maintains strength
Following a slight drop of 0.2 per cent in the United States inflation rate, the latest US April consumer price index (CPI) data indicating higher than expected figures has triggered a fall in the US share markets, leading to a reverberation through its Australian counterpart.

Markets succumb to jitters as US CPI maintains strength
Following a slight drop of 0.2 per cent in the United States inflation rate, the latest US April consumer price index (CPI) data indicating higher than expected figures has triggered a fall in the US share markets, leading to a reverberation through its Australian counterpart.

Although the Federal Reserve’s recent decision to hike the interest rate by its highest margin in decades has been followed by an inflationary drop from 8.5 per cent to 8.3 per cent, it’s still an alarmingly high rate above the expected 8.1 per cent.
And the new inflation figure has led to some worrying drops in share markets despite suggestions that the US has passed peak inflation.The S&P 500 index was down 1.65 per cent, while the tech heavy Nasdaq Composite lost 3.18 per cent.
Overall, falls in 2022 have been troubling, with the S&P 500 losing as much as 17.4 per cent - reportedly its worst start to a year in nearly a century - and the Nasdaq Composite dropping a worrisome 27 per cent.
And as indicated by the latest figures from the Australian Stock Exchange (ASX), the Australian market is presently feeling the brunt of the US shock, with tech shares battered by mass sell-offs causing significant pain for investors. As of 1pm, Thursday, the S&P/ASX All Technology Index (ASX: XTX) was down by more than 5 per cent.
While the long-term consequences of this share market fall are presently unclear, financial experts believe the stubborn US inflation could provoke the Federal Reserve into more aggressive action.
According to Russel Chesler, head of investments and capital markets at investment service VanEck, there is “greater chance that we could see more aggressive interest rate tightening from the US Federal Reserve this year”.
Mr Chesler’s assessment follows an admission by Atlanta Fed president Raphael Bostic, who said he is open to “moving more” on rates if inflation remains at current levels.
“With inflation sitting at a 40-year high, equity markets are on edge as the US Fed moves into an aggressive monetary tightening cycle, unwinding the huge amount of monetary stimulus we’ve seen in recent times,” Mr Chesler said, noting that this has fuelled concerns about an impending global recession and possibly stagflation.
In a caution that could provoke intense worry among investors, he said shares could weaken further with the “risk that inflation keeps shooting higher”.
According to Mr Chesler, the US share market remains “especially vulnerable” to higher inflation and interest rates, “dominated as it is by growth stocks, particularly tech shares, which have dropped sharply on higher bond yields”.
Chiming in on the stubbornly high inflation rate in the US, GSFM investment strategist Stephen Miller explained that despite a more aggressive approach from the Fed, financial markets “may well remain in a volatile phase”.
He explained that markets would need time to assess the success of the Fed in reining in inflation without risking a substantial economic dislocation.
“The assessments arising from the Ukraine conflict together with the fallout from China’s COVID lockdown only add to the sources of volatility,” Mr Miller said.
As for the ASX, Mr Chesler remained optimistic.
“We are sticking with our view that the Australian share market is likely to outperform the US share market, with the heavyweight miners and energy exporters benefiting from higher prices."

Stock market
Qantas forecasts return to profitability, announces ultra-long flights
Qantas expects its net debt to condense from $5.5 billion at the end of 2021 to $4.5 billion at the end of April following a period of sustained recovery in travel demand. ...Read more

Stock market
Headwinds to outnumber tailwinds in 2022
Headwinds are likely to outnumber tailwinds in 2022 as the world continues to readjust to the post-pandemic era, one expert has said. ...Read more

Stock market
Aussies can now net frequent flyer points by trading stocks
Superhero is looking to sweeten the deal for traders who are excited for the return of international travel. ...Read more

Stock market
Facebook debuts new name
Zuck gets meta. ...Read more

Stock market
2 big questions investors should ask as Australia reopens
Investors need to stop thinking about how to profit from the mineral sector’s struggles, and start looking at when the best time to ride the recovery will be. ...Read more

Stock market
Trading app popularity skyrockets as retail sector booms
In 2021, trading has never been easier for retail investors, meaning the number of users on trading applications has exploded to an all-time high. ...Read more

Stock market
ETF rush predicted to intensify
The Australian ETF sector advanced AU$6.3 billion in August to hit a new milestone, as its popularity among financial advisers soared. ...Read more

Stock market
The 6 unique Australian market affects that all active managers can exploit
The uniqueness of the Australian equities market is providing fund managers with an opportunity to essentially beat the market, new research has revealed. ...Read more

Wrapping up an eventful 2021
Listen now

What Omicron means for property, and are units right for first-time buyers? What is equity crowdfunding? Are industry super funds tapping into member funds to save their skins?
Listen now

Will housing affordability improve in 2022? Will buy now, pay later become the norm? Why are Aussies staying in failing super products?
Listen now

Who really benefits from crypto ETFs? How will the RBA respond to rising inflation? Could a mandate help address unpaid super?
Listen now

Stock market
Qantas forecasts return to profitability, announces ultra-long flights
Qantas expects its net debt to condense from $5.5 billion at the end of 2021 to $4.5 billion at the end of April following a period of sustained recovery in travel demand. ...Read more

Stock market
Headwinds to outnumber tailwinds in 2022
Headwinds are likely to outnumber tailwinds in 2022 as the world continues to readjust to the post-pandemic era, one expert has said. ...Read more

Stock market
Aussies can now net frequent flyer points by trading stocks
Superhero is looking to sweeten the deal for traders who are excited for the return of international travel. ...Read more

Stock market
Facebook debuts new name
Zuck gets meta. ...Read more

Stock market
2 big questions investors should ask as Australia reopens
Investors need to stop thinking about how to profit from the mineral sector’s struggles, and start looking at when the best time to ride the recovery will be. ...Read more

Stock market
Trading app popularity skyrockets as retail sector booms
In 2021, trading has never been easier for retail investors, meaning the number of users on trading applications has exploded to an all-time high. ...Read more

Stock market
ETF rush predicted to intensify
The Australian ETF sector advanced AU$6.3 billion in August to hit a new milestone, as its popularity among financial advisers soared. ...Read more

Stock market
The 6 unique Australian market affects that all active managers can exploit
The uniqueness of the Australian equities market is providing fund managers with an opportunity to essentially beat the market, new research has revealed. ...Read more