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US equities sharply fell overnight. The selling began after the Federal Reserve’s 50 basis point interest rate hike yesterday, taking the main rate 4.25% to 4.5% range. The shift to a lower gear following four consecutive 75 basis point hikes was widely anticipated, and bond yields barely moved in response. Overnight, US retail sales data was released – retail sales declined more than expected in November which heightened concerns around rate hikes, with the data showing that inflation has taken a toll on consumers. The Dow Jones saw its worst day in three months, falling more than 700 points or 2.25%, the S&P500 dropped 2.5% and the Nasdaq dropped 3.2%.

European markets also closed in the red after the European Central Bank signalled that “significant” rate increases are still to come. The STOXX 600 down 2.85%, Germany’s DAX and France’s CAC both closed more than 3% lower, and the FTSE 100 down 0.9%.

What to watch today:

• The SPI futures are suggesting the Australian market will fall 1.16% at the open this morning.
• In economic data, this morning the S&P Global Manufacturing and Services Flash PMI will be released. Remember the Flash PMI is a forward-looking estimate of the final PMI, set to be released next week.
• In commodities, the price of oil has dropped 1.4%, currently trading just over US$76 per barrel, as Chinese factory data piled onto demand concerns. Gold has dropped 1.7% to US$1,776 an ounce, while iron ore is down 0.5% at US$110.
• Keep watch of NAB and Link Administration (ASX:LNK) – both companies are set to hold their AGMs today.

Trading Ideas: 

• Bell Potter maintain a Speculative Buy rating on Arafura Rare Earths (ASX:ARU) and have increased their valuation from $0.64 to $0.70. At its currently share price of $0.52 this implies 36% share price growth in a year.
• Trading Central has identified a bullish signal in Qualitas (ASX:QAL) indicating that the stock price may rise from the close of $2.28 to the range of $2.70 to $2.76 over 37 days, according to the standard principles of technical analysis.