The Australian share market edged slightly higher on Thursday, as gains in financial and tech stocks offset heavy losses across energy and mining companies.
The ASX 200 index gained 0.3 per cent, to close at 6,528 points.
Some of today's performers were James Hardie (+4pc), Virgin Money UK (+3.2pc), Blackmores (+5.4pc), Metcash (+3.8pc) and Insurance Australia Group (+2.8pc).
On the flip side, gold miners St Barbara (-13.5pc), Ramelius Resources (-8.7pc) and Regis Resources (-8.2pc) fell heavily, along with Liontown Resources (-9.3pc), Champion Iron (-8pc) and Novonix (-5.3pc).
US markets were weighed down by comments about inflation from Federal Reserve chairman Jerome Powell, who appeared before the Senate Banking Committee on Wednesday (local time).
He said the Fed was "strongly committed" to bringing down inflation, which had reached its highest level in 40 years, while trying not to cause a recession in the process.
However, Mr Powell said that achieving a “soft landing” for the US economy would be "very challenging".
The Fed chair said he believed the US economy is currently strong, but acknowledged that a recession could happen.
"And, frankly, the events of the last few months around the world have made it more difficult for us to achieve what we want, which is 2 per cent inflation and still a strong labour market.”
The United Kingdom is also struggling with the rising cost of living. The latest figures showed that inflation lifted to 9.1 per cent in May — a fresh 40-year high for the British economy.
'Global forces' sink Aussie dollar
By 4:20pm AEST, the Australian dollar had fallen 0.5 per cent, to 68.9 US cents.
That was on top of its 0.6 per cent slide overnight, during the US and European trading session.
The coming sharp slowdown in the world economy will be a weight on the Australian dollar because it is very sensitive to global forces," said Commonwealth Bank currency strategist Carol Kong.
"Indeed, our forecast for the Australian dollar to weaken to 62 US cents next year is underpinned by a large expected fall in Australian key commodity prices."
"We assume commodity prices fall by around 40 per cent at the end of 2023 in line with our commodity analysts' forecasts."
Iron ore tumbled by another 5.8 per cent, to $US109.35 a tonne, according to CBA data. This steelmaking material is Australia's biggest export to China, which is undergoing an economic slowdown.
Ms Kong said "the recent fall in iron ore prices reflects market worries China's pledge to boost infrastructure investment may not materialise given China's zero COVID policy.
'Not out of the woods yet'
Investors are trying to assess how far stocks can fall as they weigh risks to the economy, with the US Fed hiking rates to bring down surging inflation.
The S&P 500 earlier this month fell more than 20 per cent from its record high in January, confirming the common definition of a bear market, with the benchmark index last week logging its biggest weekly percentage drop since March 2020.
Last week, the ASX 200 also experienced its worst trading week since the initial COVID-19 sell-off. It has fallen by around 15 per cent since its August record high, placing it firmly in correction territory.
“Markets continue to be volatile,” Baker Avenue Asset Management's chief strategist in San Francisco, King Lip, said.
"Certainly we are not out of the woods yet … the concerns are still there.”
Overnight, the S&P 500 lost 0.1 per cent, to close at 3,760 points. The Nasdaq Composite fell by 0.2 per cent, to 11,053, while the Dow Jones index dropped 0.2 per cent, to 30,483.
The three major US indexes spent much of their day in positive territory, before they slipped in the final trading hour.
In company news, Moderna shares rose 4.7 per cent, after the company said an updated version of its COVID-19 vaccine generated a strong immune response against fast-spreading Omicron sub-variants.
Recession fears sink oil prices
Oil prices tumbled as investors worried that aggressive rate hikes by the US Fed and other central banks could push the global economy into recession, dampening demand for fuel.
Brent crude futures plunged by 4.3 per cent, to $US109.74 a barrel, its lowest level in a month.
Spot gold rose 0.3 per cent, to $US1,837.53 an ounce.
"Gold edged higher as safe haven buying increased amid recessionary fears," ANZ economists Daniel Hynes and Brian Martin wrote in a research note.
ABC/Reuters
