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The share market’s struggle for direction this week looked set to continue after Wall Street’s main indices finished mixed.
US stocks ended the last full trading session of the week broadly higher as traders weighed weak results from retailers, choppy rates and indications some Federal Reserve policymakers want to reduce support for the economy faster.
ASX futures edged up seven points or less than 0.1 per cent, signalling a tentatively positive start following yesterday’s 11-point dip. The market closed yesterday within two points of where it started the week.
Iron ore climbed back above US$100 a tonne. The dollar dropped below 72 US cents for the first time in almost two months.
Wall Street
US stocks finished well above session lows, but mixed for a third session as tonight’s Thanksgiving holiday dampened buying interest. The Nasdaq Composite led with a rise of 70 points or 0.44 per cent. The S&P 500 put on 11 points or 0.23 per cent. The Dow Jones Industrial Average trailled with a decline of nine points or 0.03 per cent.
The market opened under early pressure as investors punished quarterly earnings misses from retailers Gap and Nordstrom. Gap shares tumbled 24.12 per cent. Nordstrom lost 29.03 per cent.
“A strong consumer and pent-up demand was supposed to make this a strong holiday season for retail, but margin and wage pressures are disrupting many retailer outlooks,” Ed Moya, market analyst at Oanda, told clients.
A mixed bag of economic data added to the cross-winds. First-time claims for unemployment benefits fell to a 52-year low last week. Claims plunged from 270,000 to 199,000, stunning economists who expected a reading around 260,000. Less welcome were a milder-than-expected upwards revision to second-quarter GDP and weaker-than-expected durable goods orders.
The market wobbled after the minutes from this month’s Federal Reserve meeting showed some board members want to accelerate the pace at which the central bank cuts support for the economy. The bank announced after the meeting it will reduce its monthly bond purchases from US$120 billion by US$15 billion each month.
“Some participants suggested that reducing the pace of net asset purchases by more than $15 billion each month could be warranted so that the committee would be in a better position to make adjustments to the target range for the federal funds rate, particularly in light of inflation pressures,” the minutes showed.
Vice Chair Richard Clarida said last week the pace of the taper would be on the agenda at next month’s meeting. Long-term interest rates came off their highs in the wake of last night’s report, easing pressure on growth stocks. The yield on ten-year treasuries dropped from near 1.69 per cent to 1.64 per cent. The US tech sector, which had fallen all week, bounced 0.48 per cent.
Equity exchanges close tonight for Thanksgiving. They reopen tomorrow for a morning session that is normally thinly traded as many market participants choose to stay with family.
Australian outlook
A lacklustre week looks set to continue as a market holiday on Wall Street drains impetus from equity markets. There has been plenty of churn in the US this week, but little direction.
The S&P/ASX 200 has fallen on two of the last three sessions, but a solid upswing on Tuesday means it will start the session more or less unchanged for the week.
The pick of the US sectors were real estate +1.28 per cent, energy +0.98 per cent and tech +0.71 per cent. Materials declined 0.74 per cent, financials 0.23 per cent and industrials 0.13 per cent.
The dollar fell below 72 US cents overnight for the third time this year. The Aussie snapped back quickly from previous tests of this level in August and September. However, the difference in rates outlooks at the Fed and RBA mean a period of prolonged weakness is possible. The Aussie was lately down 0.36 per cent at 71.96 US cents.
There are annual general meetings today for shareholders in Kogan, Evolution Mining, Regis Resources, Ramelius, Perseus, IOOF Holdings, NRW Holdings and Arena REIT.
IPOs: Radiopharm Theranostics lists at 11 am AEDT. Radiopharm is a clinical stage radiotherapeutics company targeting cancers.
Quarterly private-capital expenditures – another major input for next week’s GDP report – are due at 11.30 am AEDT.
Commodities
Iron ore regained the US$100 level on hopes for higher demand as the Chinese government provides additional support for the economy. The spot price for ore landed in China firmed US$4 or 4 per cent to US$103.45 a tonne.
In its latest policy update, the People’s Bank of China signalled fresh measures to stimulate the economy following a slump in property prices. Some steel mills are expected to increase output next month after meeting environmental production curbs early.
“Iron ore futures rallied on expectations of a turnaround in the demand outlook. Markets have been buoyed by strong Chinese announcements, including more support for its property sector,” analysts at ANZ Research wrote.
BHP and Rio Tinto were mixed in overseas trade. BHP‘s US-listed stock dipped 0.11 per cent after its UK-listed stock put on 0.75 per cent. Rio Tinto eased 0.11 per cent in the US after gaining 1.02 per cent in the UK.
Oil held steady as traders waited to see how OPEC+ will respond to a coordinated release of strategic reserves by several countries. Brent crude settled six US cents or 0.07 per cent lower at US$82.25 a barrel. The US benchmark eased 11 cents or 0.14 per cent to US$78.39.
Gold arrested a four-session slide, inching off a three-week low. Metal for December delivery settled 50 US cents or less than 0.1 per cent ahead at US$1,784.30 an ounce. The NYSE Arca Gold Bugs Index shed 0.26 per cent.
“The bulls have faded this week and need to step up and show power very soon to avoid serious near-term technical damage,” Jim Wyckoff, senior analyst at Kitco.com, told clients.
Progress in China’s energy crisis helped lift copper. December copper firmed 0.8 per cent to US$4.459 a pound on Comex.
“Improving power supply in China is easing some of downstream demand concerns. We expect downside to remain protected as tightness is likely to persist in the near-term,” ANZ analyst Soni Kumari said.
