ASX set for more heavy losses as rates talk rattles markets


A separate report, meanwhile, suggested manufacturing in the mid-Atlantic region is contracting by much more than economists expected. A third report showed sales of previously occupied US homes were weaker last month than economists expected.

Manufacturing and the housing industry have felt the sting of higher interest rates in particular and have struggled more than the broad job market.

Interest rates may stay high if the Federal Reserve follows through on the latest forecasts from its policy-making officials.

The typical policy maker now sees the federal funds rate rising one more time this year, and then dropping by only half a percentage point from there through 2024. Three months ago, Fed officials were indicating a full percentage point of cuts could be the most likely path. They want to ensure inflation gets back down to the Fed’s target of 2 per cent.

Wednesday’s projections may be an indication that “raises the bar for rate cuts next year,” according to Goldman Sachs economist David Mericle. He pushed out his forecast for the first cut in interest rates to the final three months of 2024, after earlier thinking it could happen during the spring.

He sees the Fed on a path where it can “simply wait until something goes wrong and then deliver either small cuts in response to a smaller growth threat, similar to the insurance cuts of 2019, or substantial cuts in response to a full recession,” he wrote in a report.

High rates slow the economy and raise the pressure across the financial industry. Earlier this spring, they helped lead to three high-profile collapses of US banks. They also hurt prices for all kinds of investments. The hardest hit tend to be those bid up on hopes for big growth far out in the future. That’s why tech stocks often swing in particular with expectations for rates.

Rupert Murdoch announced he was stepping down as the head of both companies is stepping down as chairman of both News Corp and Fox Entertainment, handing over the reins to son Lachlan. News Corp shares rose 1.8 per cent and Fox Corp shares are 2.8 per cent higher.

Cisco Systems also took a hit after it said it would buy Splunk, a cybersecurity company, for roughly $US28 billion ($43.6 billion) in cash. Cisco fell 4.1 per cent, while Splunk jumped 21.2 per cent.

On the winning side of Wall Street, FedEx rose 4.3 per cent after it reported stronger profit for the latest quarter than analysts expected.

London’s FTSE 100 slipped 0.7 per cent after the Bank of England left interest rates steady. The expectation had been for another rate hike, but a surprising report this week showed a drop in U.K. inflation.


Stock markets elsewhere around the world were much weaker.

Japan’s Nikkei 225 fell 1.4 per cent, South Korea’s Kospi dropped 1.7 per cent and France’s CAC 40 lost 1.6 per cent.

New Zealand’s benchmark index held steadier after figures released Thursday by Statistics New Zealand indicated the economy expanded at a 3.2 per cent annual pace in the April-June quarter. Finance Minister Grant Robertson said the economy was turning a corner and growing at twice the rate predicted by economists.

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