ASX futures up 1.1%; Oil spikes over $US110 per barrel again

Wall Street’s main indexes fell as Federal Reserve Chair Jerome Powell’s comments sparked bets of more aggressive interest rate hikes, adding to investor concerns as the Ukraine conflict rages on.

The US central bank must move “expeditiously” to bring too-high inflation to heel, Powell said in his remarks prepared for delivery to a National Association of Business Economics conference, adding it could use bigger-than-usual interest rate hikes if needed.

The S&P 500 closed flat, down 0.1 per cent, the Dow Jones declined by 0.6 per cent and the Nasdaq declined 0.4 per cent. Despite the negative lead, the Australian sharemarket is set for gains, with futures at 7am AEDT pointing to a rise of 81 points, or 1.1 per cent, at the open.

Traders now see a 60.7 per cent chance of a 50-basis point rate hike at the Fed’s May meeting, up from about 52 per cent before Powell’s comments. The US central bank last week raised interest rates by 25 bps to 0.25 per cent-0.50 per cent, the first increase since late 2018.

“What I’m looking at here is just the market reacting to potential hawkish Fed but I don’t think there is anything new here so far,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

“This is an oversold market and this quick reaction is based on the headline. Let us see if they can digest it a little bit more and see what he’s really saying.”

Big banks struggled for direction, with Bank of America up 0.3 per cent. The US 10-year Treasury yield hit 2.28 per cent, its highest level since late May 2019.

Technology and consumer discretionary shares fell the most after a solid rally last week. Megacap growth names Alphabet, Amazon, Microsoft and Meta were down between 0.2 per cent and 2.5 per cent.

Boeing’s 3.8 per cent slide weighed the most on the blue-chip Dow after a China Eastern Airlines jet with 132 passengers crashed in the mountains of southern China.

Meanwhile, oil prices surged 6 per cent, lifting energy shares as Brent crude climbed over $US114 a barrel as European Union nations considered joining the United States in a Russian oil embargo.

Surging commodity prices have raised concerns about higher inflation pushing the Fed to raise interest rates aggressively.

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Reuters