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ASX Today: ASX caps off worst week since GFC with more losses
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Aussie shares were set to join Wall Street at all-time highs as optimism over the rates outlook outweighs near-term concerns about the spread of the delta Covid-19 variant.

ASX futures rallied 22 points or 0.3 per cent after the Dow closed above 35,000 for the first time.

The S&P 500 and Nasdaq also made new highs. Iron ore steadied at the end of its worst week since February 2020. Oil and copper edged higher. Gold declined.

Wall Street

US stocks rose for a fourth session as upbeat earnings guidance and a rebound in bond yields helped soothe concerns about economic growth.

The Dow Jones Industrial Average passed another milestone, closing above 35,000 for the first time in history. The blue-chip average rose 238 points or 0.68 per cent to 35,061.55. The index closed above 30,000 for the first time just eight months ago on November 24.

The S&P 500 put on 44 points or 1.01 per cent. The Nasdaq Composite added 152 points or 1.04 per cent.

Investors have slowly warmed to an earnings season that has generally exceeded elevated expectations. Profits have grown an average 76 per cent last quarter from the equivalent period last year. Margins appear to have weathered a rise in inflationary pressures.

Well-received reports from Twitter and Snap helped Facebook and Alphabet advance ahead of trading updates this week. Facebook flew up 5.3 per cent. Alphabet gained 3.58 per cent. Twitter added 3.05 per cent. Snap soared 23.82 per cent.

“The Snap and Twitter results are just a reflection that digital advertising spend is coming back with a vengeance,” Nick Frelinghuysen, portfolio manager at Chilton Trust, told CNBC. “You’re seeing that ripple through into Google and Facebook.”

Growth stocks outstripped value sectors as a resurgence in Covid-19 infections encouraged traders to favour sectors that performed best at the height of the pandemic. The Russell 1000 Growth Index climbed 1.41 per cent, versus a 0.58 per cent rise in the Value Index.

The yield on ten-year US treasuries bounced to 1.281 per cent, cementing a recovery from levels that triggered panic selling at the start of the week. Yields fell to five-month lows on Monday in what some analysts viewed as a sign bond markets expected economic growth to slow sharply.

Australian outlook

Blue skies ahead as the ASX climbs steadily out of the month-long sideways trading pattern that developed since the start of the Sydney coronavirus outbreak. The S&P/ASX 200 has underperformed Wall Street since mid-June, but looks ready to give chase, despite a lack of progress in case numbers.

While economists are increasingly predicting the possibility of another lockdown-fuelled recession, investors appear to be warming to the idea an economic downturn will lock in record-low rates for longer. In other words, bad news for the economy is not necessarily disastrous for equities in the absence of alternative investments offering better returns.

Tech stocks and bond proxies kept the ASX moving upwards on Friday and look set to rise again this session. In the US, utilities, consumer staples and health all gained at least 1 per cent. Tech stocks put on 0.99 per cent and communication services (Facebook, Alphabet, Twitter) 2.65 per cent.

Energy was the only US sector to decline, falling 0.43 per cent. Financials edged up 0.13 per cent and materials 0.68 per cent.

Wednesday's quarterly consumer price index looms as the most likely market-mover on the economic calendar. The week ahead also brings a speech from Reserve Bank Deputy Governor Guy Debelle to a US teleconference (tomorrow), quarterly import prices (Thursday) and producer prices and private-sector credit (Friday).

IPOs: a much lighter week for initial public offerings starts with a familiar name. The holding company for the Best and Less high-street retail chain lists at 11 am AEST today. The schedule for the rest of the week currently looks like this: Aquirian (Tuesday); and East 33 and M3 Mining (Thursday). Note scheduled listings are frequently prone to last-minute delays or cancellations.

In the US, Big Tech moves to centre stage as the quarterly reporting season enters its third week. Big names this week include: Alphabet, GE, 3M (Tuesday); Apple, Amazon, Facebook, Boeing (Wednesday); and Procter & Gamble and Exxon Mobil (Friday).

The Federal Reserve meets this week and will release a policy update on Wednesday night. Also this week: new home sales (tonight); consumer confidence (Tuesday); advance GDP, weekly jobless claims (Thursday); and core price index (Friday).

The dollar has declined steadily in the face of the deteriorating outlook for rates. The Aussie dipped below 73 US cents last week and started a new week with an up-tick of 0.06 per cent to 73.66 US cents.

Commodities

Iron ore steadied at the end of its worst week since the start of the pandemic. The spot price for ore landed in China bounced 40 US cents or 0.2 per cent to US$201.90 a tonne. Ore slumped US$19.20 or 8.7 per cent last week after China ordered steel mills to cut output to reduce carbon emissions.

"Steel makers in Jiangsu have received guidance to rein in output from last year’s levels, according to MySteel. This follows a 12% rise in total Chinese output in the first half of the year," commodities strategist Daniel Hynes of Hynes Commodities said.  

BHP's US-listed stock rebounded 1.06 per cent and its UK-listed stock added 1.3 per cent. Rio Tinto gained 0.84 per cent in the US and 1.37 per cent in the UK.

Oil rose for a fourth session as traders became more comfortable with an OPEC+ deal to increase production. Brent crude settled 31 US cents or 0.4 per cent ahead at US$74.10 a barrel. Crude prices plunged almost 7 per cent on news of the OPEC deal but have healed steadily since last Monday's fall.

Gold logged its first weekly loss in five weeks as traders favoured risk assets. Metal for August delivery settled $3.60 or 0.2 per cent lower at US$1,801.80 an ounce on Friday. For the week, the yellow metal declined 0.7 per cent, pressured by a rising greenback and improved bond yields.

Copper climbed for a fourth session. US-traded copper rose 1.4 per cent on Comex to US$4.40 a pound. For the week, the most active copper contract gained 1.8 per cent.

“Demand optimism seems to have regained the upper hand," analyst Daniel Briesemann at Commerzbank told Reuters. "Just two or three days ago, there were concerns that the rapid spread of the delta variant would hit demand, but this seems to have taken a back seat now.”

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