ASX tumbles as Wall Street wobbles on rate worries



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Health insurance companies led the market lower on worries about their upcoming profits after the US government announced lower-than-expected rates for Medicare Advantage. Humana tumbled 13.4 per cent. Tesla, meanwhile, dropped 4.9 per cent after delivering fewer vehicles for the start of 2024 than analysts expected.

One of the big reasons the US stock market has screamed higher since late October is the expectation that the Federal Reserve will cut interest rates several times this year. The central bank itself has hinted as much, and an easing of rates would relieve pressure on both the economy and financial system.

But Fed officials have also said they need further confirmation inflation is heading sustainably down to their 2 per cent target before acting. A surprisingly strong report on US manufacturing Monday, which showed a return to growth after 16 straight months of contraction, hurt those expectations.

It’s the latest evidence of a remarkably resilient US economy. That keeps people employed and corporate profits humming, but it could also add upward pressure on inflation. Progress there has become bumpier recently, with inflation reports this year coming in hotter than expected.

Loretta Mester, president of the Cleveland Fed, said Tuesday that the bigger risk is cutting interest rates too early, rather than too late. The former could allow the economy to overheat and inflation to reaccelerate, while the latter could cause unnecessary pain for workers.

Her comments came as economic reports showed US employers were advertising roughly the same number of job openings in February as they were a month earlier and a stronger-than-expected gain in factory orders.

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In the bond market, the yield on the 10-year Treasury rose to 4.35 per cent from 4.33 per cent late Monday.

The two-year yield, which moves more closely with expectations for Fed action, slipped to 4.69 per cent from 4.71 per cent late Monday.

High rates slow the economy by design, by making borrowing more expensive. They also hurt prices for investments by making it more attractive for investors to put money instead in safer alternatives. Bitcoin fell 5.4 per cent.

Among the few gainers on Wall Street were stocks of oil and gas producers. Exxon Mobil rose 2 per cent and Marathon Petroleum rose 3.4 per cent.

They followed the price of crude higher. A barrel of benchmark US oil rose $US1.44 to settle at $US85.15 and is back to where it was in October. A barrel of Brent crude, the international standard, climbed $US1.50 to $US88.92.

In Europe, stocks fell 0.9 per cent in Paris. Germany’s DAX lost 1.1 per cent, and London’s FTSE 100 was 0.2 per cent lower.

In Asia, indexes were mixed. Hong Kong’s Hang Seng jumped 2.4 per cent, but moves were much more modest elsewhere.

With AP



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