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ASX 200 gold shares have risen recently on the back of the shock invasion of Ukraine and rampant inflation. But the shine may be starting to come off. A leading broker forecasts a circa 10% drop in the gold price by year-end.

Citigroup is a medium-term bear when it comes to this precious metal. It believes the safe-haven asset will drop to US$1,750 an ounce in the December quarter, reports the Australian Financial Review.

“Our conversations with investors suggest spot price expectations are mixed on a [six to 12 month] view, understandably given the moving parts,” the AFR quoted Citi.

“The caveat to our view is should the Russia-Ukraine conflict manifest into a macroeconomic shock, this could provide a more sustained bid for gold.”

Have ASX 200 gold shares hit their peak?

If this prediction comes to pass, it may impact the share prices of gold mining companies such as Newcrest Mining Ltd (ASX: NCM), Evolution Mining Ltd (ASX: EVN), and Northern Star Resources Ltd (ASX: NST).

After all, these ASX 200 gold shares have rallied strongly in the past several weeks, along with the gold price.

Geopolitical tailwinds for gold

But the gold price could stay well supported in the near-term, concedes Citi. This is because the Russian central bank may be forced to buy gold on the open market due to international sanctions.

The country has been cut off from the international banking system and its currency has collapsed. The use of physical gold is one way for Russia to keep trading.

Russia turning to gold

The gold reserves accumulated by Russia are estimated to be worth about US$135 billion. Most of it is held in Russian-controlled territory. It makes Russia the fifth-largest holder of bullion amongst global central banks.

Importantly, Russia is a large gold-producing nation. It was ranked second in the world last year, behind China. Russia’s central bank has said it will buy gold directly from Russian refiners.

Are ASX 200 gold shares worth buying?

There are two issues. First, Russia still doesn’t have enough gold. This is because Russia is effectively cut off from all major currencies, including the euro. Plus, most of its overseas assets are frozen.

This means Russia’s useable reserves may be as low as US$210 billion if only its gold and Chinese yuan reserves are counted, notes Citi.

The other issue is liquidity. It may not be as easy for Russia to trade using gold given it is cast out from international markets.

“Russia being excluded from the London physical gold market (and presumably from the Suisse refining centres) as well as the benchmark Comex bourse, might tighten availability of bullion stocks,” says Citi.

The broker has a largely neutral outlook on ASX 200 gold shares. However, it does rate Evolution Mining and Northern Star as buys.

The post Is the party over for ASX 200 gold shares? appeared first on The Motley Fool Australia.

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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Brendon Lau owns Newcrest Mining Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

It’s Wednesday, and Tesla (NASDAQ: TSLA) stock is moving higher in late morning trading — up 4.5% as of 11:30 a.m. ET.

The question is… why?

So what

As Reuters reported late last night, the sudden surge in COVID-19 infections in China has prompted that country’s government to impose quarantines in Shanghai, the location of Tesla’s Chinese Megafactory.

Acceding to the restrictions, Tesla announced it is shutting down production for at least two days — and the closure could last as long as two weeks if Shanghai officials need longer than that to conduct their contact tracing. That sounds like bad news for Tesla’s production numbers. But business magazine Barron’s argues today that “there is good news too” that is offsetting the bad, and helping to keep Tesla’s stock price moving higher.    

There’s just one problem with that: I don’t actually see any good news for Tesla today.

To the contrary, on top of the shutdown, today we’re hearing:  

• Higher raw material costs are necessitating price increases on Tesla vehicles, which could dampen consumer demand.
• Tesla just fired an employee for posting on YouTube a video of his Tesla running on Full Self Driving Beta — and getting into an accident.
• S&P Global just warned that the conflict in Ukraine could depress global car sales by as many as 1 million units this year, while continuing supply chain constraints could subtract a further 1.6 million units from global automobile production.

Now what

For that matter, even Barron’s seems to contradict itself on the good news front, highlighting falling oil prices that could lower the cost of gasoline, and remove an incentive pushing car buyers to switch to electric cars.

Granted, Barron’s also highlights recent moves by the Chinese government to shore up its stock market, and the potential for peace talks to end the Ukrainian conflict at some point in the future, calling those two news items good news. Combined with falling oil prices, these factors could explain why investors in general are feeling a bit more optimistic today than they were last week, for example.

None of that sounds like “good news too” for Tesla in particular, however. If investors were thinking rationally today, I kind of suspect that Tesla stock would be going down, not up. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why did Tesla stock pop today? appeared first on The Motley Fool Australia.

More reading

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Tesla. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Rio Tinto Limited (ASX: RIO) share price is climbing from the open today and is currently up 2.26% at $109.33.

Rio has been in the headlines lately regarding its proposed acquisition of Turquoise Hill. This would bring its stake in a Mongolian copper operation to 66%.

Unfortunately, the acquisition has had a mixed reaction from stakeholders, with some analysts and shareholders questioning the move, while others praised the outcome.

Now the deal has another hurdle to overcome with reports a key Turquoise Hill shareholder has scathed the proposal as being too cheap. Let’s take a look.

Too cheap, shareholder says

One of Turquoise Hill’s major investors, SailingStone Capital Partners, has voiced its concerns over the proposed deal, saying it is “highly opportunistic”, according to reporting from The Australian.

The firm owns a 2.4% stake in Turquoise, and is reportedly unsatisfied with the deal’s particulars, believing Rio has valued the company too low.

“An additional premium to compensate minority shareholders for losing access to an asset of this quality seems eminently reasonable,” SailingStone reportedly said in an open letter to the company’s management.

SailingStone reckons the mining giant can cough up way more than what it is offering – a C$32 per share deal to buy the remaining 49% it does not already own – due to its performance lately.

“This bid appears to be highly opportunistic, coming in the midst of an equity overhang caused by Rio’s mismanagement of both the project and the partnership and just ahead of mine completion with the accompanying free cash flow that will benefit all stakeholders for decades into the future,” SailingStone said.

“Furthermore, the commodity backdrop is as attractive as it has ever been, placing a premium on any long-lived, low-cost reserve base,” it added.

Analysts at Barrenjoey Markets made note of Rio’s potential discount in buying the asset, stating that “this seems like a good deal” on face value.

Morgan Stanley was also constructive and said the project has been de-risked after agreements with the Mongolian government, valuing Rio at $122.5 per share in the process.

Macquarie also reckons the deal should be a net positive for the Rio share price and rate it a buy alongside Credit Suisse and Goldman Sachs at valuations of $140, $130, and $131.50 per share respectively.

It remains to be seen what the next moves will be from either side. However, SailingStone has certainly made its points heard to the public.

Rio Tinto share price summary

In the last 12 months, the Rio Tinto share price has fallen more than 2% into the red. However, this year to date, it has regained strengths and is around 8% in the green.

As commodity prices start to soften Rio shares have also weakened lately and now trade 8% in the red over the past month.

The post ‘Highly opportunistic’: Rio Tinto (ASX:RIO) share price higher amid Turquoise takeover setback appeared first on The Motley Fool Australia.

More reading

• Top brokers name 3 ASX shares to buy today
• Is the Rio Tinto (ASX:RIO) share price a buy following the miner’s latest acquisition news?
• Brokers name 3 ASX mining shares to buy today
• Leading brokers name 3 ASX shares to sell today
• Why are ASX 200 mining shares having such a dire day?

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Shares in Jindalee Resources Limited (ASX: JRL) are surging well into the green today and now trade 14% higher at $3.01 apiece.

Investors have pounced on the Jindalee share price today following a company announcement regarding its 100% owned McDermitt Lithium Project in the US.

Why is the Jindalee share price charging higher?

The company today announced assay results from 6 diamond core drill holes that were completed late in 2021 at McDermitt.

All assays from the 2021 drill program have been received, and according to Jindalee, these latest results include some of the “thickest intercepts of lithium mineralisation” reported at the project to date.

Drilling intercepted mineralisation in each hole, including 73.5m at 1554 parts per million (ppm) lithium (Li) and 60m at 1880ppm, the company said.

As the diamond drill holes intersected a number of higher-grade mineralised zones with greater than 3,000ppm lithium, the scalability of the project is reinforced, the company says.

Jindalee says the new drill data will be used to update the mineral resource estimate due for completion early in the June quarter, per the release.

The release notes that planning for the next phase of drilling this year is well underway and all drill permits are on hand to commence.

“The remainder of the drilling will focus on investigating the untested mineral potential across the western tenure and look for opportunities for higher grade material”, it remarked.

Not only that, but Jindalee is also advancing the project through its application for an exploration plan of operations (EPO) in the US.

At present, it is currently nurturing discussions with the Bureau of Land Management (BLM) and the Oregon Department of Geology and Mineral Industries (DOGAMI).

Jindalee share price summary

In the last 12 months, after a wild ride, the Jindalee share price has still managed to climb more than 73% and is up 37% this year to date.

As such, Jindalee is actually in the green across all major timeframes and is leading the benchmark S&P/ASX 200 index (ASX: XJO)’s return so far in 2022.

The post Jindalee (ASX:JRL) share price rockets 18% on ‘huge lithium’ find appeared first on The Motley Fool Australia.

More reading

• ‘Highly opportunistic’: Rio Tinto (ASX:RIO) share price higher amid Turquoise takeover setback
• Why is the 4DMedical (ASX:4DX) share price rocketing 30% today?
• Want to secure the biggest ever dividend from this ASX 200 share? Here’s why you need to buy today
• 2 beaten down ETFs for ASX investors to check out
• ASX 200 shares open with a bang following US interest rate rise

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The 4DMedical Ltd (ASX: 4DX) share price is flying this morning, up 30.5% in the first hour of trading.

4DMedical shares closed yesterday at 71 cents and are currently trading for 92 cents.

So, why are ASX investors bidding up the 4DMedical share price today?

World’s first dedicated lung scanner

In an early morning announcement, 4DMedical revealed it is launching the world’s first dedicated lung scanner – the XV Scanner – today. News that looks to be driving the 4DMedical share price higher.

The scanner has been installed at the Prince of Wales Hospital in Sydney. It will be unveiled today in the presence of Federal Minister for Health, Greg Hunt.

The Australian Government’s Medical Research Future Fund (MRFF) contributed $28.9 million towards the scanner’s development.

According to the release, the scanner will give doctors “unprecedented and highly visual insight into lung function”.

The company highlighted that the scanner provides numerous opportunities to drive its commercialisation plans.

4DMedical’s founder and CEO, Andreas Fouras said:

From a project delivery angle, the XV Scanner was completed on time and within budget despite challenges created by the ongoing COVID-19 pandemic.

From the viewpoint of doctors and patients, the scanner represents a seminal event in the global evolution of respiratory diagnostics, and from a commercialisation perspective, this scanner creates multiple opportunities to drive adoption of XV Technology.

Lung Foundation Australia CEO, Mark Brooke called the scanner “a breakthrough in innovation, holding significant promise for the 7 million Australians living with or impacted by lung disease”.

Brooke added, “This new technology promises to revolutionise diagnostic and imaging procedures for a range of lung diseases impacting children, adults and older Australians.”

4DMedical share price snapshot

Despite today’s big lift, the 4DMedical share price remains down by 30% in 2022. That compares to a year-to-date loss of 5% posted by the All Ordinaries Index (ASX: XAO).

The post Why is the 4DMedical (ASX:4DX) share price rocketing 30% today? appeared first on The Motley Fool Australia.

More reading

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Carsales.com Ltd (ASX: CAR) share price is climbing during morning trade, adding to its decent gains last week.

This comes despite the auto listings company not releasing any price-sensitive announcements to the ASX today.

At the time of writing, the Carsales share price is up 4.33% to $21.93.

Why is the Carsales share price going up?

While the company has been quiet on the news front lately, investors are bidding up the Carsales share price.

This is most likely because of the upcoming ex-dividend date for Carsales shares.

Investors need to buy Carsales shares before the market close today to be eligible for the interim dividend. The ex-dividend date is tomorrow, Friday 18 March.

It’s worth noting that historically when a company reaches its ex-dividend day, its shares tend to fall in proportion to the dividend paid out. This is because investors tend to sell off the company’s shares after securing the dividend.

When can Carsales shareholders expect payment?

Eligible shareholders will receive a dividend payment of $25.5 cents per share on 19 April. This represents growth of 2% compared against the previous corresponding dividend of 25 cents per share.

It’s also worth noting that this is the biggest dividend ever paid by the company.

The interim dividend is fully franked, which means shareholders can expect to receive tax credits.

Investors can elect to reinvest their dividends through the dividend reinvestment plan (DRP), which will buy them more shares in lieu of a cash payment.

While there is no DRP share price discount, the last election date for Carsales shareholders to opt-in is 22 March.

The DRP will be calculated using the 5-day average daily volume-weighted price from 22 March to 28 March.

The latest dividend is consistent with the company’s longstanding dividend payout policy of 80%.

Carsales share price summary

Over the last 12 months, the Carsales share price has surged by almost 20% but it is down 14% year to date.

The company’s shares reached a 52-week high of $26.67 in November before treading 17.7% lower to today’s price.

Carsales commands a market capitalisation of roughly $5.94 billion and has a trailing dividend yield of 2.26%.

The post Want to secure the biggest ever dividend from this ASX 200 share? Here’s why you need to buy today appeared first on The Motley Fool Australia.

More reading

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended carsales.com Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Uniti Group Ltd (ASX: UWL) share price has jumped out the blocks this morning. In early trade, it is up 4.29% at $4.13.

Uniti has been in the headlines lately after confirming asset manager HRL Morrison & Co. has put in a $3 billion takeover bid for the company.

Now there are reports a second player might be in the running, just to throw a spanner in the works. While Morrison & Co. has exclusive talks until April 22 on the deal, one contingency is the absence of a superior offer.

What’s up with the Uniti share price today?

Market pundits are watching the Uniti share price closely today as reports have surfaced a competing bid might be on the table.

Telecommunications provider Vocus Group is understood to be working on a counter bid following the $3.06 billion proposal laid down this week, The Australian reports.

Vocus is owned by Macquarie Infrastructure and Real Assets plus Aware Super – who purchased the telco for $3.5 billion in 2021 – and will therefore likely have a huge cash trigger at its disposal. It provides telecommunication services across Australia and New Zealand.

The group will be up against Morrison & Co.’s enormous $20 billion asset base, which is comprised of sovereign wealth funds and real infrastructure assets.

Morrison & Co. had offered $4.50 per Uniti share in its proposal, an approximate 14% premium to its closing price on Wednesday.

Vocus will therefore need to outbid this offer in order to be taken seriously, seeing as the current bid has the front row seats to examine Uniti’s books until the end of April.

The Australian also reports that some Uniti investors reckon the asset manager’s offer is too low, and that a Vocus deal would offer more ‘unity’, so to speak.

“Yet there are Uniti investors that say that Morrison’s offer of $4.50 per share is not enough for the group and they believe only at $5 does it start to get interesting,” The Australian wrote.

“They argue Vocus would be able to extract more synergies than Morrison or any other pure financial buyer”.

It remains to be seen what the group’s next move might be in relation to a potential Uniti bid. However, if it were up at $5 per share, that represents a 26% premium to Uniti’s closing price on Wednesday.

Uniti share price snapshot

In the past 12 months, the Uniti share price has soared more than 63% but it is down around 14% this year to date, in line with the performance of the broad tech sector.

Over the past month, shares are back in the green and have surged 24% in the past five days of trading.

The post Uniti (ASX:UWL) share price climbs amid reports Vocus will make a play appeared first on The Motley Fool Australia.

More reading

• Why Austal, Contact Energy, Nanosonics, and Uniti shares are dropping
• ‘Cannot rule out new interest’: What you need to know about the Uniti (ASX:UWL) takeover bid
• Uniti (ASX:UWL) share price rockets 31% after confirming takeover approach
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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited and Uniti Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

What happened

Chinese stocks were skyrocketing across the board Wednesday on news that Beijing may be reversing course on its regulatory crackdown after China’s economy grew by just 4% in the fourth quarter and stock prices there have plunged. The crackdown was part of China’s “common prosperity” campaign, which is intended to boost both social equality and central government control, sometimes at the expense of the nation’s most successful companies.

However, with more than $1 trillion in value having been sapped from Chinese stocks and Hong Kong’s Hang Seng Index at a six-year low, and with geopolitical tensions simmering due to Russia’s invasion of Ukraine, Beijing now seems ready to pivot. Vice Premier Liu He said the government would support the economy and keep markets stable — welcome reassurance to investors who have seen their portfolios shrink as regulators have levied a series of fines and restrictions on some of China’s best-known tech companies. Liu said the government should “actively introduce policies that will benefit markets.”

In other words, investors seem to believe that Beijing has decided to switch roles, transforming from an impediment to stock market growth into a supporter of it. That view sent Chinese stocks soaring, especially in the beaten-down internet sector.

At the same time, a Chinese securities regulator said Wednesday that it was in communication with its U.S. counterparts with the goal of reaching an agreement on auditing supervision rules that could defuse the threat of a wave of stock delistings.

Among the winners Wednesday were 51Job (NASDAQ: JOBS), which was up 11.8% as of 12:44 p.m. ET; iQIYI (NASDAQ: IQ), which had gained 42.9%; Baozun (NASDAQ: BZUN), which rose 19.1%; Hello Group (NASDAQ: MOMO), which jumped 45.8%, and Bilibili (NASDAQ: BILI), which climbed 39.6%. At the same, the Kraneshares CSI China Internet ETF (NYSEMKT: KWEB), which counts tech giants like Alibaba and Tencent and JD.com as its biggest holdings, soared by 29.5%, reflecting the boom across the sector. 

So what

There was no news out on any of these companies specifically on Wednesday, but China’s regulatory crackdown has been taking a steep toll on their stock prices. Even though they haven’t faced direct effects from the intensified regulatory environment that has prevailed in China recently in the ways that larger companies like Alibaba have, those tighter regulations have impacted that nation’s economic growth and the performance of these businesses.

For example, in its fourth-quarter earnings report last week, e-commerce services provider Baozun reported a decline in revenue despite an increase in gross merchandise volume, which the company blamed in part on larger economic issues in China such as “weaker consumption sentiment” and a “weaker macro environment.”

Hello Group, which operates internet dating sites Momo and Tantan, said revenue was essentially flat year over year in its most recently reported quarter, though the pandemic may be the biggest challenge facing that company. Bilibili, an online video entertainment platform, has seen its growth rate slow, but it’s still expanding briskly with revenue up 51% to $907.1 million, making the stock a good candidate for recovery as it’s still down 80% from its all-time high.

51job, which operates a job recruiting site, said its revenue growth clocked in at 19% in its most recent quarter, though it noted headwinds from the pandemic and related restrictions. Chinese video streaming service iQIYI also reported flat revenue in its latest quarter, and cited a challenging macroeconomic environment for its 10% decline in advertising sales, though the company’s problems predate the regulatory crackdown in China.

Now what

Wednesday’s announcement from the Chinese government is a significant step, and should help alleviate what has been the biggest burden on China’s tech sector over the past year. However, these stocks are still facing other challenges. Those include the delisting threat in the U.S., which gained new urgency after the SEC cited five specific Chinese stocks at risk of removal from U.S. exchanges by the end of the month; the pandemic, a fresh outbreak of which recently led the Chinese government to impose lockdowns in Jilin province and the city of Shenzhen — a massive tech manufacturing hub — for at least a week; and the broader slowdown of the Chinese economy, which may take more than government action to reignite.

Still, many of these stocks are undervalued compared to their historical levels, and with the Chinese government seemingly prepared to be friendly to its domestic companies, strong performers like Bilibili could soar again. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Why Chinese internet stocks were soaring today appeared first on The Motley Fool Australia.

More reading

• Why Chinese tech stocks were tumbling again today

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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If you’re looking for exchange traded funds (ETFs) to buy then it could be worth getting better acquainted with the two listed below.

Both of these ETFs have fallen heavily in 2022 and are now trading close to 52-week lows. Here’s what you need to know about them:

BetaShares Asia Technology Tigers ETF (ASX: ASIA)

The first beaten down ASX ETF to look at is the BetaShares Asia Technology Tigers ETF. As its name implies, this ETF gives investors exposure to many of the best tech shares in Asia.

Unfortunately, a combination of a crackdown in China’s tech sector and general market weakness has weighed heavily on many of the shares in the ETF, which has led to the fund losing 27% of its value this year.

But one thing that hasn’t changed is the positive long term outlook of many of these “tigers”, which are benefiting greatly from technological adoption in Asia.

Among the companies included in the fund are the likes of Alibaba, Baidu, JD.com, Meituan Dianping, Pinduoduo, Samsung, and Tencent.

In respect to Tencent, is a multinational technology conglomerate and one of the largest companies in the world. Its communication and social platforms, WeChat and QQ, connect over a billion users with each other and with digital content and services. Tencent also has a rapidly growing games business.

As for Alibaba, it is often regarded as the Amazon of China. It has close to a billion customers across its Alibaba, Taobao, and Tmall brands. From these platforms, the company is estimated to control over half of China’s e-commerce market.

ETFS Battery Tech & Lithium ETF (ASX: ACDC)

Another beaten down ETF for investors to look at is the ETFS Battery Tech & Lithium ETF. Its units are down 16% since the start of the year.

This ETF gives investors exposure to providers of electrochemical storage technology and battery materials/lithium miners. These companies could be well-placed for growth over the coming decade thanks to the incredible demand for battery materials due to the decarbonisation and electrification theme.

And with supply struggling to keep up with demand, battery material prices look set to remain high for some time to come, which bodes well for the companies producing them.

Included in the fund are the likes of AMG Advanced Metallurgical Group, Lockheed Martin, Pilbara Minerals Ltd (ASX: PLS), and Sumitomo.

The post 2 beaten down ETFs for ASX investors to check out appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended BetaShares Asia Technology Tigers ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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It has been a great start to the day for the  S&P/ASX 200 Index (ASX: XJO) on Thursday.

In morning trade, the benchmark index is up a massive 1.7% to 7,296.8 points.

Why is the ASX 200 charging higher?

The ASX 200 is charging higher today following an exceptionally strong night of trade on Wall Street.

In response to news that the US Federal Reserve has increased rates, the Dow Jones rose 1.55%, the S&P 500 climbed 2.2%, and the Nasdaq index stormed 3.8% higher.

The latter has put a rocket up Australian tech shares today, with the likes of Appen Ltd (ASX: APX) and Zip Co Ltd (ASX: Z1P) up more than 6% in early trade. This has helped drive the S&P ASX All Technology index up 4.2%.

Elsewhere, Commonwealth Bank of Australia (ASX: CBA) and the rest of the big four banks are all up at least 1% currently.

US Federal Reserve raises rates

Overnight the US Federal Reserve elected to increase rates by 0.25%, bringing the Fed funds rate to the range of 0.25% to 0.5%.

The central bank explained that it made the move in response to strong economic data and to combat inflationary pressures.

“Indicators of economic activity and employment have continued to strengthen. Job gains have been strong in recent months, and the unemployment rate has declined substantially. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures.

The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The implications for the U.S. economy are highly uncertain, but in the near term the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With appropriate firming in the stance of monetary policy, the Committee expects inflation to return to its 2 percent objective and the labor market to remain strong. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent and anticipates that ongoing increases in the target range will be appropriate.”

The final sentence is being interpreted as six more rate increases in 2022, one at each of the US Fed’s remaining meetings.

So why are ASX 200 shares rising?

Given how panicked investors have been about rising rates, it may seem peculiar that US and ASX 200 shares are rallying on the news.

Interestingly, the initial reaction was not positive, with US shares falling shortly after the announcement before staging an almighty recovery in the final hour of trade.

E-Trade’s Managing Director of Investment Strategy, Mike Loewengart, believes the market is interpreting the news positively due to it signalling confidence in the US economy.

He told CNBC: “The market seems to be taking today’s news in stride, which means it likely priced in today’s announcement accordingly. And let’s not forget that monetary tightening means the Fed believes the economy is on solid footing, which is a good thing at the end of the day.”

The post ASX 200 shares open with a bang following US interest rate rise appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended Appen Ltd and ZIPCOLTD FPO. The Motley Fool Australia owns and has recommended Appen Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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