Second wave of European inflation on its way, as energy crisis sees costs spiral

Stocks fell for a fourth straight day on Wednesday, the last day of August, putting the summer market comeback in doubt as investors weighed the Federal Reserve’s inflation-fighting efforts. The major averages were higher earlier in the day.

The Dow Jones Industrial Average slid nearly 0.9 per cent,The S&P 500 lost roughly 0.8 per cent , and the Nasdaq Composite fell about 0.6 per cent to 11,816.20. The major averages were higher earlier in the day.

What began as a strong month for the three major averages ended on a weaker note. The Dow finished August down nearly 4.1 per cent, while the S&P and Nasdaq posted monthly losses of 4.2 per cent and 4.6 per cent, respectively.

The market gave up early bounce attempts that were likely helped from slower jobs growth and select Internet read-throughs from SNAP update. Shares of Snap, the parent company of social media app Snapchat, surged 9 per cent. In addition to announcing that it is reducing its full-time employee headcount by about 20 per cent, the company said it is either substantially reducing or entirely eliminating investments in some of its more speculative and obscure product lines and services.

It’s also been a wild month for Bed Bath & Beyond shares amid a return of retail-trader interest. The meme stock, a favourite of the reddit crowd, jumped from a low of $4.89 at the start of August to an intramonth high of $30 in the middle of the month, before paring those gains. It came under pressure recently after influential investor Ryan Cohen sold his stake in the firm, only to bounce back on the possibility of fresh financing.

Overnight the Energy sector was under notable pressure alongside weaker crude. Oil prices have continued to slide on investor worries about the ailing state of the global economy, the prospect of central bank interest rate hikes, and increased restrictions to curb Covid-19 in China.

On the energy front, China's coal stocks have been rising as investors are betting that the country's plan to revive economic growth will override concerns about pollution to drive demand for fossil fuels and reliable energy. Note that China's coal index has surged by roughly 10 per cent in August, bringing this year's gains to nearly 50 per cent. Beijing must weigh short-term economic stability against longer-term goals of carbon emissions reduction, with markets betting that a focus on the former will prevail.

An emerging trend is seeing coal fired plants extend their decommissioning in response to the energy crisis.

Across Europe political leaders have been trying to calm fears about the spiralling energy costs. Germany’s Economy Minister said the country’s gas storage facilities were close to hitting an 85 per cent storage target ahead of winter. The minister said Germany was “better prepared” for this latest round of pipeline maintenance, Russia has halted the flow of gas through the Nord Stream 1 pipeline to Europe for three days

The energy crisis raises fears of Europe facing a “second wave” of inflation as spiralling energy prices drive up the cost of everything from wages to logistics. The head of the world’s largest building materials company which works on big construction projects across Europe and the US and is valued at €30bn, said it was hit by a 50 per cent increase in energy costs in the first half of the year

Currencies

One Australian dollar has weakened compared to the US dollar yesterday, buying 68.45 US cents (Wed: 68.57 US cents), 58.91 Pence Sterling, 95.12 Yen and 68.09 Euro cents.

Commodities

Iron ore futures are pointing to a 1.5 per cent gain.

Gold lost $10.10 or 0.6 per cent to US$1726 an ounce. Bullion has lost about 3 per cent in August for its fifth straight month of declines.

Silver was down $0.40 or 2.2 per cent to US$17.88 an ounce.

Copper fell $3.25 or 0.9 per cent to US$351.85 a pound

Oil lost $2.09 or 2.3 per cent to US$89.55 a barrel.extending 5.5 per cent selloff in the prior session.

Futures

The SPI futures are pointing to a 1 per cent fall.

Figures around the globe

Across the Atlantic, European markets closed lower. Paris fell 1.4 per cent, Frankfurt lost almost 1 per cent and London’s FTSE closed 1.1 per cent lower.

Asian markets closed mostly lower. Tokyo’s Nikkei lost 0.4 per cent, Hong Kong’s Hang Seng closed flat and China’s Shanghai Composite closed 0.8 per cent lower.

Yesterday, the Australian sharemarket lost 0.2 per cent to 6987.

Ex-dividends

There are 23 companies set to trade without the right to a dividend.

AGL Energy (ASX:AGL) is paying 10 cents unfranked
BHP Group (ASX:BHP) is paying 247.0705 cents fully franked
Bailador Technology Investments (ASX:BTI) is paying 7.4 cents fully franked
Credit Corp Group (ASX:CCP) is paying 36 cents fully franked
Dalrymple Bay (ASX:DBI) is paying 4.5675 cents unfranked
Eumundi Group (ASX:EBG) is paying 3.5 cents fully franked
Fenix Resources (ASX:FEX) is paying 5.25 cents fully franked
GR Engineering (ASX:GNG) is paying 10 cents fully franked
GTN (ASX:GTN) is paying 1.3 cents unfranked
HiTech Group Aust (ASX:HIT) is paying 6 cents fully franked
Homeco (ASX:HMC) is paying 6 cents fully franked
Ironbark Capital (ASX:IBC) is paying 1.25 cents fully franked
Integral Diagnostics (ASX:IDX) is paying 3 cents fully franked
InvoCare (ASX:IVC) is paying 13.5 cents fully franked
Jumbo Interactive (ASX:JIN) is paying 20.5 cents fully franked
Johns Lyng Group (ASX:JLG) is paying 3 cents fully franked
Money3 Corporation (ASX:MNY) is paying 7 cents fully franked
NB Global Corporate Income Trust (ASX:NBI) is paying 0.7111 cents unfranked
Peoplein (ASX:PPE) is paying 6.5 cents fully franked
Platinum Asset Management (ASX:PTM) is paying 7 cents fully franked
Silk Logistics (ASX:SLH) is paying 6.3 cents fully franked
Southern Cross Media Group (ASX:SXL) is paying 4.75 cents fully franked
Whitehaven Coal (ASX:WHC) is paying 40 cents fully franked