The laggards

James Hardie Industries (down 2.8 per cent), Sonic Healthcare (down 1.8 per cent) and Pro Medicus (down 1.8 per cent) were the worst performing large-cap stocks.

Mining heavyweight Rio Tinto ended the day flat (up 0.02 per cent) after falling almost 1 per cent in early trade when it reported a 5 per cent drop in iron ore production and shipments in the first quarter of this year. Capital Economics said the steel-making element was likely to revisit $US100 ($156) a tonne by the end of the year before falling further to $US85 in 2025 as China’s housing market collapse worsens.

Falling steel production and emissions controls on highly polluting blast furnaces should shrink Chinese iron ore demand by 1 per cent in 2024 and 2 per cent in subsequent years, the London-based research firm said in a note on Tuesday. At the same time, plans by the big miners to raise production will swell supply, putting prices under pressure.

Iron ore has staged a mini-recovery this month after tumbling below $100 a tonne due to disappointing demand in China. Futures last traded at $US111.10 a tonne in Singapore, up 1.1 per cent on the day although that’s still more than 20 per cent lower than at the start of the year.

Loading

BHP, the biggest stock on the ASX 200, declined 1.2 per cent, weighing on the wider Australian sharemarket

The lowdown

US Federal Reserve chair Jerome Powell warned overnight that inflation remained stubbornly high and the rapid decline in consumer prices at the end of last year had stalled. He noted that it would probably take more time for Fed officials to gain the necessary confidence that price growth was headed towards the US central bank’s 2 per cent goal before they lowered borrowing costs.

“The recent data have clearly not given us greater confidence and instead indicate that it is likely to take longer than expected to achieve that confidence,” Powell said in Washington.

Capital senior financial market analyst Kyle Rodda said the ASX 200’s bounce barely held, with the index giving up early gains.

“Tuesday’s underperformers — those interest rate-sensitive sectors — were amongst the best today. However, the rebound wasn’t enough to reclaim what was lost. The market remains just above a key support level at around 7590, which acted as critical support yesterday, with a break potentially signalling further downside risk,” Rodda said.

On Wall Street overnight, US Treasury yields climbed to fresh 2024 highs — those on two-year notes hovering near the 5 per cent mark. Meanwhile, the S&P 500 fell 0.2 per cent to 5051.33, taking this week’s losses so far to 1.4 per cent. The Nasdaq 100 slipped 0.1 per cent, while the Dow Jones Industrial Average edged up 0.2 per cent.

To Jeffrey Roach at LPL Financial, Powell’s comments signal the Fed will probably stay on hold for longer than originally planned.

“I think the outlook for inflation has not deteriorated as much as the bond market seems to think,” said Neil Dutta at Renaissance Macro Research. “All Powell is doing is following the market, taking three months of bad inflation data and assuming it forward.”

The Australian dollar dipped below US64¢ for the first time this year after Powell’s statement.

His remarks represent a shift in his message following a third straight month in which a key measure of inflation exceeded analyst forecasts. It also shows officials see little urgency to cut rates and suggests that any reductions in 2024 may come relatively late in the year, if at all.

Tweet of the day

Quote of the day

“Higher mortgage rates could result in higher debt-to-income ratios and a progressive deterioration in housing affordability which could spur a further home price correction,” the International Monetary Fund has noted. Prospective Australian home buyers are facing some of the biggest price increases in the developed world, new research shows, while evidence grows that the economy is struggling as higher interest rates force more businesses to the wall.

You may have missed

A 20-year-old man wrongly identified by the embattled Seven Network as the Bondi Junction mass murderer has engaged a high-profile legal team to threaten defamation action against the TV network. Benjamin Cohen, who was incorrectly identified as the knife attacker by Seven on Sunday, has engaged two of Australia’s foremost defamation lawyers, Patrick George of Giles George as his solicitor and Sue Chrysanthou, SC, as his barrister.

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.