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A bank-led sell-off on Wall Street points to early pressure on Australian shares as the countdown to Christmas enters its final week.

Futures trading indicated the S&P/ASX 200 was likely to open 30 points or 0.42 per cent lower this morning. The Australian benchmark has fallen for five of the last six weeks.

US stocks retreated on Friday, along with risk assets such as crude oil and copper. Gold and iron ore rallied.

Wall Street

Wall Street ended a volatile week in the red as investors continued to position for higher interest rates next year. High-flying Big Tech came under pressure as the US nears the end of its tax year. Negative Covid headlines weighed on the major banks, energy and other sectors leveraged to economic demand.

The S&P 500 declined 48 points or 1.03 per cent. The Dow Jones Industrial Average skidded 532 points or 1.48 per cent. The Nasdaq Composite eased 11 points or 0.07 per cent.

Stocks fell for a second session as four kinds of options and futures contracts expired during a so-called “quadruple witching” session. Investors took profits in some of 2021’s best performers ahead of the end of the US tax year.  

“It’s a big options expiration day,” Joe Saluzzi, co-manager of trading at Themis Trading, told Reuters. “And now you draw on top of that some Omicron, and you’ve got volatility, and I think it creates a lot of uncertainty amongst investors. Where are you going to position for the end of the year?”

Big Tech has outperformed the wider market throughout the pandemic. On Friday, Alphabet (Google) gave up 1.88 per cent, Apple 0.65 per cent and Microsoft 0.34 per cent. The three companies all shed at least 4 per cent last week amid end-of-year selling.  

Bank stocks unwound a rally that followed Wednesday’s Federal Reserve policy update. The US central bank indicated it will wind up its asset-buying program faster than previously indicated and raise rates up to three times next year to contain soaring inflation.

Goldman Sachs lost 3.92 per cent. Wells Fargo shed 4.67 per cent, Bank of America 2.49 per cent and JPMorgan Chase 2.28 per cent.

Vaccine-makers were among the week’s standouts amid omicron’s rapid spread. Moderna put on around 14.7 per cent and Pfizer 12.7 per cent.

Pfizer warned on Friday the pandemic could extend through next year. The firm’s global president of vaccines said the virus would likely become an “endemic disease” like flu in much of the world by 2024. The Netherlands announced a hard lockdown.

The S&P 500 lost around 1.7 per cent for the week. The Dow dropped 1.9 per cent and the Nasdaq 3 per cent.

Australian outlook

Santa? You out there? Hello? Prayers for a “Santa rally” have as yet gone answered. If he’s coming this year, he’s leaving it late. The market’s current malaise was summed up on Friday as a relief rally dwindled from a robust gain of 0.7 per cent to a paltry 0.1 per cent by the close. 

The S&P/ASX 200 has had one good week in the last six. The benchmark appears to have slipped into a medium-term downtrend characterised by “lower highs” in September, mid-November and December 8. Horizontal support around 7185/7200 has held so far, but a close below those levels would open the door to a much deeper retrace.

The market mood last week was not helped by record new Covid case numbers in the re-opened New South Wales. Weekend figures showed no let-up. The state recorded all-time highs on Saturday and Sunday. While there is no appetite within government for a return to lockdown, economic activity over the crucial holiday season is likely to take a hit. 

There were few positives in Friday’s US action. All 11 sectors declined. Falls ranged from 0.3 per cent for the defensive real estate sector up to a chunky 2.27 per cent for financials and 2.24 per cent for energy. Industrials lost 1.7 per cent and materials 1.32 per cent.

Newsflow is expected to slow dramatically this week in the rundown to Christmas. Friday’s annual general meetings were the last of the year. Listed companies are obliged to meet continuous disclosure obligations over the holiday season, but corporate activity normally thins until well into January.

Economic data is also going to be light on the ground. The minutes from this month’s RBA meeting on Tuesday looks like the only release with the potential to move the market.

IPOs: no let-up in the end-of-year scramble to list. The ASX has nine companies lined up to make their debuts this week, including five on Wednesday.

BirdDog Technology at 11 am AEDT today manufactures audio-visual and video technology. ChemX Materials at 2 pm develops materials for battery technology, including high purity alumina.  

The rest of the week currently looks like this: Rubix Resources (Tuesday); Atturra, DMC Mining, Falcon Metals, Greentech Metals and Infinity Mining (Wednesday); and Solis Minerals (Friday).

The dollar rallied 0.24 per cent this morning to 71.41 US cents.

Commodities

Oil slumped to its seventh weekly loss in eight weeks as rising omicron cases raised the threat of demand destruction. Brent crude settled US$1.50 or 2 per cent lower at US$73.52 a barrel. For the week, the global benchmark lost 2.2 per cent.

“Omicron concerns are raising the prospect of reduced travel and movement,” Edward Meir, analyst at ED&F Man Capital Markets, said.

Gold regained US$1,800 an ounce, logging its highest close in almost four weeks. Metal for February delivery settled US$6.70 or 0.4 per cent ahead at US$1,804.90. The NYSE Arca Gold Bugs Index eased 0.25 per cent after jumping more than 5 per cent on Friday.

Precious metals have attracted buying in recent sessions as inflationary worries encourage hedging and investors seek pandemic-proof havens against the economic impact of omicron. Silver climbed 0.2 per cent on Friday for a weekly gain of 1.5 per cent.

Aluminium hit a six-week high amid evidence of tightening supply as Chinese producers battle soaring energy costs. Three-month aluminium on the London Metal Exchange climbed more than 3 per cent before trimming its advance to 2.5 per cent. Copper declined 0.2 per cent on Comex to US$4.295 a pound.

Iron ore claimed a seven-week high as production picked up following environmental curbs earlier in the year. The most-traded contract on the Dalian Commodity Exchange climbed 1.9 per cent to 767.5 yuan (US$106.20).

BHP‘s US-listed stock dipped 0.31 per cent after its UK-listed stock gained 0.28 per cent. Rio Tinto declined 1.35 per cent in the US and 0.14 per cent in the UK.

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