US stocks closed lower on Tuesday in the first trading session of this holiday-shortened week as the rising price of oil places further pressure on the Federal Reserve on an inflationary front. The S&P500 fell 0.42%, the Dow Jones lost 0.56% and the tech-heavy Nasdaq fell in late trade to close down 0.08% after trading higher all day. Oil prices have been on the rise over the last week after Saudi Arabia extended its 1-million-barrels per day voluntary oil production cuts. US Treasury yields also rose on Tuesday which reduces investor appetite for riskier assets like equities.

Looking at the odds of a recession in the US, Goldman Sachs cut its recession odds to 15% and said it anticipated the Federal Reserve will skip a rate hike at the next FOMC meeting later this month. While this news would normally boost the market, investors weighed this news against September being historically one of the weakest months for equities.

In Europe, markets fell on Tuesday as sentiment around stimulus out of China begins to fade despite favourable economic data released in the region in the form of the Eurozone producer price index showing producer prices were down 7.6% YoY in July, dropping for a 7th consecutive month. Another dampener on Tuesday was the revision for inflation expectations for the next three years rising from 2.3% in June to 2.4% in July, while one-year expectations remain unchanged at 3.4%. 

The local market rebounded in afternoon trade yesterday to close the session just 0.06% lower after trading in the red all day. Iron ore miners like BHP and Rio Tinto and the utilities sector weighed on the market while health care and industrials stocks offset some of the heavy losses in afternoon trade. The market also rallied in afternoon trade following the RBA’s rate decision announcement.

The RBA has maintained the nation’s cash rate at 4.1% for the month of September as Philip Lowe handed down the decision at his last meeting as RBA governor. The reason behind the hold was as the board assesses uncertainty around the economic outlook and its bid to establish a more sustainable balance between supply and demand in the economy. 

What to watch today: 

• Ahead of the local trading session here in Australia the SPI futures are expecting the ASX to open the midweek session down 0.23% on the back of the global sell-off overnight.
• Australia’s GDP Growth rate data for Q2 is out today with consensus expecting a rise to 0.3% growth for Q2 from 0.2% growth in Q1. Pending the reading we will likely see markets respond accordingly.
• On the commodities front this morning, oil is trading 0.91% higher at US$86.71/barrel, gold is down 0.62% at US$1926/ounce and iron ore is up 0.43% at US$117.50/tonne.
• AU$1.00 is buying 64 US cents, 94.30 Japanese Yen, 50.96 British Pence and NZ$1.09. 

Trading Ideas: 

•  Bell Potter has increased the price target on BCI Minerals (ASX:BCI) from 32cps to 44cps and now have a speculative risk rating associated to the buy rating on the mining and exploration company amid analysis of BCI’s cost and design review for its Mardie Salt and Potash Projects. The update highlights raised base capital costs of $1.421bn and a delay to the first salt production to 2H 2026 from the prior guidance of 2H 2024, however, the higher costs and delayed timeline are consistent with recent challenges across the industry.
• And Trading Central has identified a bullish signal on Myer (ASX:MYR) following the formation of a pattern over a period of 19-days which is roughly the same amount of time the share price may rise from the close of $0.70 to the range of $0.80 to $0.82 according to standard principles of technical analysis.