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A soggy finish to a record November on Wall Street points to a subdued start to Australian trade.
ASX SPI200 index futures declined 11 points or 0.2 per cent as the local market looks to regain its footing following three straight falls.
End-of-month portfolio rebalancing helped pull the S&P/ASX 200 down 1.3 per cent yesterday. Much of the selling came in the closing auction where fund managers seek volume to complete large share disposals and acquisitions.
Wall Street
US investors cashed in on their best monthly returns in decades. Growth stocks outperformed the value plays that swept the market higher this month on the prospect of widely-available vaccines.
The value-heavy Dow Jones Industrial Average led the retreat with a fall of 272 points or 0.91 per cent. The broader S&P 500 declined 17 points or 0.46 per cent. The growth-focussed Nasdaq Composite eased a modest seven points or 0.06 per cent.
The Dow’s 11.8 per cent total for the month was the blue-chip average’s best since January 1987. The S&P 500 gained 10.8 per cent and the Nasdaq Composite 11.8 per cent. Both totals fell narrowly short of their April pandemic-rebound tallies. The Russell 2000 index of small caps had its best month ever.
Analysts pinned end-of-month rebalancing as the primary cause of last night’s weakness, coupled with caution ahead of a heavy week of economic data.
“It is a sell-off that is warranted after such strong gains,” Peter Cardillo, chief market economist at Spartan Capital Securities, told Reuters. “We have a lot of macro news this week and the non-farm payrolls [monthly US jobs report] may not be too friendly to the market.”
Positive vaccine news had limited impact – a sign of possible “vaccine fatigue” following last month’s explosive gains. The US Heath Secretary said Americans could have access to vaccines before Christmas. Moderna shares soared 20.6 per cent after the company outlined plans to fast-track approvals for its vaccine in the US and Europe.
High street retailers declined following disappointing foot traffic on Back Friday. Department stores Macy’s and Kohl’s fell 6 and 3.9 per cent, respectively. Airlines and cruise companies also took a hit.
Australian outlook
The first and last sessions of each month belong to the fund managers and other institutional traders entrusted with the nation’s superannuation investments. Index-trackers have to re-align their holdings to reflect each company’s new end-of-month weighting on the index.
The S&P/ASX 200 took a heavy hit after a tumultuous month, falling 83 points or 1.3 per cent yesterday. Steep though that tumble was, it was not enough to thwart the index’s best monthly tally in its history: a gain of almost 10 per cent. The All Ords secured its biggest rise since 1988: 9.9 per cent.
A new month often brings fresh impetus. Three straight days of declines give the market wiggle room for rebound gains this week before overhead resistance comes into play.
Multi-year highs in iron ore and copper did little for our miners yesterday. BHP, Rio Tinto and Fortescue Metals fell for a third session. A fresh six-year peak in ore and eight-year peak in Shanghai copper in the last 24 hours may provide a floor today.
Technology was the best of the US sectors, adding 0.7 per cent as investors picked up temporarily out-of-favour growth plays. Health stocks gained 0.3 per cent, thanks in part to Moderna. The energy sector tumbled 5.4 per cent as crude pared a strong month. The financial sector slid 1.9 per cent and materials 0.9 per cent.
A huge week of economic data today brings reports on manufacturing, building approvals and the national balance of payments, as well as a Reserve Bank cash rate decision and policy statement. The central bank is not expected to make any major announcements at 2.30 pm AEDT, but the rate statement will be combed for changes in wording.
Collins Foods releases earnings today. Midway holds its AGM. Santos and Incitec Pivot hold investor days.
The dollar sank 0.75 per cent overnight to 73.45 US cents.
Commodities
Iron ore punched to a new six-year high following upbeat Chinese manufacturing data. The spot price for ore landed in China rose $1.35 or 1 per cent to US$132.30 a tonne.
No relief for our iron ore majors overnight. BHP’s US-listed stock faded 2.57 per cent and its UK-listed stock 2.26 per cent. Rio Tinto gave up 1.64 per cent in the US and 1.8 per cent in the UK.
US energy stocks hit the skids as oil sold off ahead of an OPEC+ decision on production caps. Chevron was the biggest weight on the Dow, falling 4.5 per cent. Brent crude settled 37 cents or 0.8 per cent lower at US$47.88 a barrel after the OPEC Conference ended without an official decision. Energy traders hoped for extensions to production limits due to expire in January.
A grim month for gold bugs ended with the precious metal at a five-month low. Gold for February delivery settled $7.20 or 0.4 per cent in the red at US$1,780.90 an ounce, its weakest close since early July. Gold lost almost 6 per cent during November. The NYSE Arca Gold Bugs Index picked up some bargain-hunting, rising 0.82 per cent.
Shanghai copper surged to its highest level since September 2012 yesterday on news Chinese factory activity hit its fastest pace in three years. On the London Metal Exchange, benchmark copper climbed 1.1 per cent to US$7,569.25 a tonne. Aluminium gained 2.5 per cent. Nickel fell 2.6 per cent, lead 1.3 per cent and tin 1.5 per cent. Zinc finished flat.
