Fed’s Warsh gets markets primed for rate hike; US taps Venezuelan oil

New Zealand and Australian stock markets are set to start the week lower as investors braced for US interest rates to go higher after Federal Reserve chair Kevin Warsh said the central bank’s focus should be on prices, with inflation running ahead of the Fed’s target.

Tech stocks weighed on Wall Street on Friday as Nvidia gave back some of its gains and Marvell Technology disappointed investors wanting to see an even bigger lift in the semiconductor firm’s guidance.

Oil prices eased heading into the weekend before US President Donald Trump declared the US would take control of Venezuela’s proven reserves in partnership with a private company.

And Crimson Education’s A$38.6 million takeover bid for ASX-listed Kip McGrath Education Centres has hit a snag, with Australian reports that a Sydney fund had built a blocking stake.

Rates rumblings

The kiwi dollar fell to 59.25 US cents at 7am in Auckland from 59.58 cents against a broadly stronger greenback amid growing expectations for the Fed to hike its federal funds rate in September after chair Warsh’s keynote address at the annual central bankers’ symposium in Jackson Hole, Wyoming. The yield on US 10-year treasuries rose 3 basis points to 4.72%.

Warsh said the Fed’s focus was on prices, with inflation running ahead of the central bank’s 2% target and labour markets consistent with full employment. Warsh is moving the central bank away from providing forward guidance to reduce the feedback loop of markets and the Fed chasing each other and missing new developments, saying he was committed to “discipline, not to a decision”.

“Ironically, the reaction to Jackson Hole rather proved Warsh’s point,” Salt Funds Management economist Bevan Graham said in a note. “He delivered a speech about how the Fed should think and communicate in a changing economy. Markets immediately asked what it meant for September.”

Stock markets on Wall Street declined on Friday, with the Dow Jones Industrial Average marginally weaker, while the tech-heavy Nasdaq Composite fell 0.5% and the S&P 500 slipped 0.3%.

Tech stocks were broadly softer with Nvidia and Intel among those on the red side of the ledger, while Marvell dropped 10% after the semiconductor firm beat earnings estimates and raised its forecast, but still fell short of hyped expectations.

SpaceX rose for a fourth day on Friday even as OpenAI said it planned to stop providing artificial intelligence models to the space conglomerate’s coding tool unit Cursor, saying it wasn’t confident that SpaceX would stick to the terms of service.

New oil

Meanwhile, US President Trump said he planned to take control of 65 billion barrels of Venezuela’s proven oil reserves in a partnership with a private company to create the world’s second-biggest private oil company. The Wall Street Journal reported the firm would be led by Venezuelan businessman Alejandro Betancourt and have the opportunity to develop 17 oil fields.

Brent crude oil futures slipped 0.5% to US$89.30 heading into the weekend.

Separately, Trump said he was preparing a legal order to let farmers and ranchers get the right to process their own food in a bid to break what he described as “a nasty monopoly” without naming a particular food or industry.

Across the Atlantic, European stock markets were stronger on Friday, with the UK’s FTSE 100 up 0.3%, Germany’s DAX gaining 0.8% and France’s CAC 40 advancing 1%.

Meanwhile, Icelanders rejected a proposal to restart talks about joining the European Union, with 52.8% voting no in a referendum over the weekend.

Australian futures are pointing to a 0.4% decline for the S&P/ASX 200 index when trading opens across the Tasman after the soft lead from Wall Street and the rise in interest rates.

And the Australian Financial Review’s Street Talk column reported Sydney arbitrage fund Harvest Lane Asset Management lifted its stake in Kip McGrath to almost 20% on Friday from 5.8%, offering the same price as Crimson’s takeover bid.

Greg Boland, market strategy consultant at Moomoo, said New Zealand’s S&P/NZX 50 index would likely start the week lower as well. The local bourse is on track for its fourth monthly gain, up 0.5% so far in August.

Local data today include ANZ’s monthly business survey, with the Reserve Bank’s policy review on Wednesday the main event in New Zealand. Bond traders have almost fully priced in a rate hike.

Reporting by Paul McBeth. Image from Joshua Hoehne on Unsplash.