ASX eyes gains, Wall Street rises; Fed meeting in focus

US stocks rebounded and regained much of their losses for the week after oil prices eased off their recent spurt. An update on inflation across the United States that came in close to economists’ expectations, even if prices are still rising too quickly for everyone’s liking, also helped calm the market.

The S&P 500 climbed 0.9 per cent and snapped a four-day losing streak, its longest since June. The Dow Jones Industrial Average jumped 509 points, or 1 per cent, and the Nasdaq composite rose 1 per cent.

The Australian sharemarket is set to climb, with futures on Saturday pointing to a gain of 18 points or 0.2 per cent, at the open. The Australian dollar was trading at US71.75¢.

They got help from a pullback in oil prices, which had jumped to their highest levels since May because of the ongoing war with Iran. The price for a barrel of Brent crude, the international standard, fell 2.8 per cent to settle at $US104.61 after getting near $US110 overnight.

That took a bit of pressure off inflation, which remains stubbornly high. A report on Friday showed that US consumers had to pay prices for gasoline, food and other costs of living that were 3.4 per cent higher last month than a year earlier.

While still high, that was close to what economists expected and what Wall Street was prepared for. The data also strengthened expectations among traders that the Federal Reserve will feel compelled to hike its main interest rate at its meeting this week.

Such moves are the typical way the Fed tries to rein in high inflation, and they work by filtering through the bond market, making it more expensive for everyone to borrow money, slowing the economy and hopefully removing fuel for further inflation.

The rising expectations for an upcoming hike to rates drove up the yield of the two-year Treasury, which moves with guesses for upcoming Fed action, to 4.62 per cent from 4.56 per cent late Thursday.

Longer-term Treasury yields held steadier, though. That could be a signal that investors in the bond market see upcoming hikes by the Fed as helping to keep control of inflation over the longer term. The yield on the 10-year Treasury rose more modestly to 4.97 per cent from 4.95 per cent late Thursday, while the 30-year yield eased to 5.36 per cent from 5.37 per cent.

Economists say hikes could quiet questions about the Fed’s commitment to keeping inflation under control. Worries had risen earlier in the summer about its credibility and whether it would do what’s needed to bring inflation down, even if it causes pain for the economy in the near term.

Federal Reserve Chairman Kevin Warsh has been adamant about not giving hints about where the Fed may take interest rates, though he did calm some concerns among investors at a speech late last month. President Donald Trump, meanwhile, has been pushing for interest rates to go lower rather than higher.

“Symbolism can trump substance, even when it comes to monetary policy,” according to Brian Jacobsen, chief economic strategist at Annex Wealth Management.

It’s all coming at a moment when confidence among Americans continues to sour.