Australian oil producers and the local currency are taking a hit, as the price of brent crude oil comes down from weeks of frenzied trade.
- The Australian dollar lost more than 1 cent against the greenback in the past 24 hours
- Investors are anticipating the first US rate rise since the pandemic when the Fed finishes meeting early on Thursday morning AEDT
- European and UK stocks gained ground on hopes for Russia-Ukraine peace talks, but US tech stocks dived on rate rise fears
At 10:25 am AEDT, the ASX 200 was down 0.7 percent to 7,202.
Some of the biggest companies being hit with losses around 4 percent included Beach Energy and BHP, which both have interests in oil production.
That’s as the price of oil fell overnight, with Brent crude down almost 6 percent, to around $ US106 a barrel, by 8:30 am (AEDT).
The oil price had been climbing for weeks on Russia’s invasion of Ukraine. Russia is the world’s second largest producer of critical commodity, and the conflict has thrown this global supply into question.
But now the price of it is coming down off its high on Russia-Ukraine peace talks, with some delegates from both sides saying that draft agreements could be reached within days.
In Australia, the price at the pump has been pushed beyond $ 2.
Other early losers on the ASX 200 included miners Champion and Chalice, both with losses around 7 percent.
On the flip side, Uniti Group had gained 16.8 percent on talk in the media that it is in discussions to be bought out.
Australian dollar loses ground
At 8:45 am AEDT, the Australian dollar was fetching 71.88 US cents.
The Australian dollar has lost around 1 cent in a day and US tech stocks dived another 2 per cent overnight as investors brace for a US interest rate rise later this week.
That also saw European and UK stock markets close higher, with London’s FTSE up 0.5 per cent, at 7,193, and the Eurostoxx 600 index up 1.2 per cent.
“Everything seems to be heading towards an acute point where we should have some headway,” Thomas Hayes, chairman at Great Hill Capital in New York, told Reuters.
“The fact is, neither side has a complete edge and, as a result, talks are the most sensible outcome, with some type of resolution.”
However, any optimism about the prospect of an end to the Ukraine conflict was tempered on Wall Street by the near-certainty of a rate rise later this week.
“The Fed is expected to hike rates by 25 basis points (this week) and you’re seeing the 10-yield [bonds] rise, which is positive from a yield curve perspective, and implies the flattening may be coming to an end, “Mr Hayes added.
“We may avoid an inversion and a recession in the near term.”
Nonetheless, the tech-heavy Nasdaq slipped further into bear market territory, falling another 2 percent overnight, to 12,581, and now in excess of 20 percent off its November peak.
The sell-off was more subdued on the S&P 500, which had traded higher earlier in the session but closed down 0.7 percent, at 4,173 points.
The Dow Jones Industrial Average closed flat, at 32,945 points.