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A holiday-shortened week looked set for a positive start as gains in key sectors help offset a mixed finish on Wall Street on Friday.  

ASX futures firmed 27 points or 0.36 per cent, signalling an early rebound from the S&P/ASX 200’s first losing week in a month. The Australian benchmark eased 0.2 per cent last week in choppy trade as global markets prepared for higher rates.

On Friday, US stocks closed mixed but mostly lower. Oil, gold, nickel and zinc rallied. Iron ore, copper and aluminium declined.

Wall Street

A week-long retreat in growth stocks dragged on the Nasdaq Composite and S&P 500 as investors continued to shed companies whose profit outlooks were most at risk from higher rates. The Dow Jones Industrial Average rose as the financial sector responded to the opportunity to expand margins.  

The Nasdaq Composite shed 186 points or 1.34 per cent. The S&P 500 gave up 12 points or 0.27 per cent. The Dow put on 138 points or 0.4 per cent.

Friday’s action continued a trading theme established on Tuesday when Federal Reserve Governor Lael Brainard revealed the central bank was getting serious about tightening monetary policy to rein in inflation. Brainard indicated the bank intends to pare its balance sheet by US$95 billion each month and may raise rates by up to 50 basis points at more than one meeting this year.

“We’re still of the view that nothing really major occurred this week aside from the remarks [from Brainard] Tuesday morning, and the last several days have been a function of digesting her words,” Adam Crisafulli of Vital Knowledge wrote.

While all the of the major indices declined last week, the Dow outperformed the Nasdaq as value stocks weathered the selling better than growth stocks. The Dow slipped 0.28 per cent, versus a 3.86 per cent loss for the Nasdaq. The broader S&P 500 shed 1.27 per cent.

“We’re going into a very long-term and meaningful period of value outperforming growth,” David Bahnsen, chief investment officer at wealth manager the Bahnsen Group, told Reuters. “Growth is overvalued and value is undervalued,” he added.

Tech stocks sold off again on Friday. Nvidia dropped 4.5 per cent, Tesla 3 per cent, Alphabet 1.91 per cent and Microsoft 1.46 per cent.

On the Dow, gains in Home Depot, Goldman Sachs and JPMorgan Chase helped offset declines in Apple, Intel and Microsoft. The Russell 1000 Value Index gained 0.51 per cent, versus a 1.09 per cent loss for the Russell 1000 Growth Index.

Healthcare giants Merck and UnitedHealth were among the week’s best performers as investors sought stable earners in a slowing economy. Merck gained 5 per cent for the week, UnitedHealth 6.5 per cent.

Australian outlook

Futures traders identified enough positives in Friday’s US action to anticipate a positive open. Crucially, banking stocks and miners rose in a falling market, two areas where the ASX is heavily-weighted. BHP rallied in US and UK trade (more below).

Energy producers should get off to a strong start following a 2.76 per cent bounce in the US as crude trimmed a losing week. US financials gained 1.01 per cent, health 0.58 per cent and materials 0.55 per cent.

Three sectors dominated by ‘Big Tech’ finished at the bottom. Technology shed 1.43 per cent, consumer discretionary 0.97 per cent and communication services 0.74 per cent.

The S&P/ASX 200 eased 16 points or 0.2 per cent across a week dominated by central bank commentary on rates. The week ahead should see corporate earnings moving back onto centre stage as a new quarterly reporting season gets underway in the US.

Banking heavyweights dominate the first week of the season. JPMorgan Chase reports on Wednesday night. Goldman Sachs, Wells Fargo, Morgan Stanley and Citigroup follow on Thursday. Bank of America reports next Monday. Tomorrow night’s consumer inflation report also looms as a potential hurdle. 

Back home, the most likely market-mover is Thursday’s March employment report. Economists expect the jobless rate to tick down to 3.9 per cent from 4 per cent in February, continuing the recent trend.

Other highlights this week include: monthly business confidence, weekly consumer confidence (Tuesday); and monthly consumer sentiment, quarterly building activity (Wednesday). China releases inflation figures at 11.30 am AEST today.

The four-day Easter break may prompt some judicious pruning of positions towards the end of the week. Wall Street takes Friday off, but does not recognise Easter Monday as a holiday, meaning US markets will trade twice before the ASX reopens on Tuesday.

Iluka Resources holds its annual general meeting on Wednesday. Bank of Queensland releases half-year earnings on Thursday. Quarterly reports will start to dribble in this week. 

IPOs: a slower week coming up after last week’s flurry of new listings. There are just three companies hoping to get off the mark this week: Firetail Resources and Narryer Metals on Wednesday, and Osmond Resources on Thursday.

The dollar declined for a third session, trading at 74.56 US cents this morning after hitting 76.62 cents on Tuesday.

Commodities

Oil rebounded at the end of a losing week. Brent crude settled US$2.20 or 2.2 per cent ahead at US$102.78 a barrel. The recovery trimmed the global benchmark’s loss for the week to 1.5 per cent.

Buying interest cooled last week as the Shanghai Covid lockdown dented Chinese demand and after the White House and International Energy Agency announced substantial releases from strategic reserves.

Iron ore capped a downbeat week with another down-leg on Friday. The spot price for ore landed in China declined US$1.14 or 0.7 per cent to US$155.50 a tonne. For the week, the spot price fell US$4.48 or 0.8 per cent amid weak demand during a two-day public holiday and with Shanghai in lockdown.

BHP‘s US-traded depositary receipts gained 0.41 per cent. The miner’s UK stock jumped 2.16 per cent. Rio Tinto eased 0.71 per cent in the US after rising 0.82 per cent in the UK.

Gold sealed a resilient week with an up-tick on Friday despite headwinds that included rises in the greenback and US treasury yields. Metal for June delivery settled US$7.80 or 0.4 per cent higher at US$1,945.60 an ounce. For the week, gold improved 1.1 per cent.

“Despite the spike in volatility seen elsewhere this week as a result of the hawkish Fed shift, gold has been unmoved,” Craig Erlam, senior market analyst at Oanda, wrote.

Industrial metals were mixed as investors weighed soft demand from China, supply-chain issues fuelled by war embargoes on Russia and speculation about Chinese stimulus measures.

Benchmark copper on the London Metal Exchange dipped 0.1 per cent to US$10,304.75 a tonne. Aluminium shed 0.3 per cent. Nickel improved 0.5 per cent, lead 0.6 per cent, zinc 2.5 per cent and tin 0.5 per cent.

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