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Aussie shares were poised for their first positive start in five days as a rebound in commodity prices helped offset a third straight loss for the Dow and S&P 500.
ASX futures rose 15 points or 0.22 per cent as mining giants BHP and Rio Tinto advanced in overseas trade.
Iron ore, oil and copper rebounded. Gold broke a six-session losing run. The dollar regained 69 US cents.
Reporting season continues today with updates from Coles, Qantas, Domino’s Pizza, Tabcorp and Seven Group.
Wall Street
US stocks struggled for a third night as data showed the economy was slowing, sharpening recession fears ahead of this week’s address by Federal Reserve Chair Jerome Powell.
The S&P 500 faded to a loss of nine points or 0.22 per cent after seesawing in and out of positive territory. The Dow Jones Industrial Average shed 154 points or 0.47 per cent. The Nasdaq Composite finished barely changed, down less than a point.
Private-sector business activity shrank to the lowest in 27 months, according to S&P Global’s composite purchasing managers’ index. The PMI dropped to 45 this month from a final reading of 47.7 in July. Readings below 50 indicate contracting activity.
“Material shortages, delivery delays, hikes in interest rates and strong inflationary pressures all served to dampen customer demand,” the report said.
Lowering demand is one of the Fed’s targets as it tries to reduce inflation from four-decade highs. The central bank has lifted rates from near zero to the current range of 2.25-2.5 per cent this year.
A separate report showed sales of new homes plunged 12.6 per cent in July. The pace of sales was the slowest since 2016.
The stock market’s strong rebound since mid-June has stalled in the last week after Fed officials pushed back against the idea the bank may slow or pause rate hikes any time soon. Chair Powell is expected to use Friday’s address at the annual Jackson Hole economic symposium to reaffirm the bank’s commitment to fighting inflation.
“What we have seen in the past week is the realization that the Fed could still raise interest rates by 75 basis points in September,” Jake Dollarhide, chief executive of Longbow Asset Management, said. “The market fears that Powell’s going to go back into a hawkish stance.”
The S&P 500 has declined almost 4 per cent since August 16, denting a 17 per cent recovery since the bear market lows in June.
Overnight, lockdown favourite Zoom Video Communications slumped 16.54 per cent as waning demand and increased competition dented its full-year outlook. Department store Macy’s jumped 3.76 per cent after beating earnings expectations.
Australian outlook
A punch-drunk S&P/ASX 200 will look for respite this session following four straight declines. Yesterday’s close was the weakest this month as a global retreat gathered pace.
Wall Street continued to slide overnight, but the slower pace offers hope after heavy falls of more than 2 per cent the previous session. Importantly for the ASX, commodity stocks resisted the selling.
Energy was the best of the sectors with a rise of 3.62 per cent after Saudi Arabia hinted at production cuts to protect prices. BHP and Rio Tinto rallied as the basic materials sector put on 0.98 per cent.
The rebound in commodity prices brought relief for the dollar. The Aussie popped 0.63 per cent to 69.22 US cents.
Bond proxies remained under pressure as a pause in rising yields proved fleeting. Real estate dropped 1.46 per cent, healthcare 1.39 per cent and utilities 0.63 per cent.
The domestic earnings season is deep into the second half. Companies reporting today include Coles, Qantas, APA Group, Tabcorp, Seven Group, Domino’s Pizza, Sonic Healthcare, WiseTech, Worley, G8 Education, Iluka Resources, Netwealth, The Lottery Corporation, Airtasker, PolyNovo, HomeCo, Ingenia, IDP, MyDeal, Pepper Money, Platinum Asset Management, Regis Resources and Zip Co (sources: CommSec, Australian Financial Review).
Fisher & Paykel Healthcare holds its AGM. Data on skilled jobs vacancies are due this morning.
IPOs: the week’s only new listing is scheduled for 10.30am AEST. Heavy Rare Earths is an explorer with rare earths projects in WA and the Northern Territory.
Commodities
Oil surged to its highest in more than a week after Saudi Arabia’s energy minister warned the Organization of the Petroleum Exporting Countries and allies could reduce production if a deal with Iran brings more crude onto the market. European leaders are in the process of negotiating a revival of a 2015 deal to restrict Iran’s nuclear ambitions.
“Many traders thought that rally in oil prices had come to an end as investors were worried once again about weak demand and excessive supply. But OPEC’s members have many tactics to balance the oil prices without doing anything. The fact that Saud Energy Minister said that there is a need to adjust oil output has put the oil bears on their toes and brought oil bulls back in the market,” Naeem Aslam, chief market analyst at AVATrade, said.
Brent crude settled US$3.74 or 3.9 per cent higher at US$100.22 a barrel. The US benchmark climbed 3.7 per cent to US$93.74.
Iron ore rose for a second day after China lowered interest rates. The spot price for ore landed in China firmed 55 US cents or 0.5 per cent to US$104.92 a tonne. The most-traded ore contract on the Dalian Commodity Exchange climbed 2.5 per cent to 705 yuan.
BHP‘s US-traded depositary receipts rallied 2.58 per cent. In the UK, the Big Australian’s stock firmed 1.94 per cent. Rio Tinto improved 3.68 per cent in the US and 2.13 per cent in the UK.
Gold‘s longest losing run since July ended with a retrace in the greenback. Gold for December delivery settled US$12.80 or 0.7 per cent higher at US$1,761.20 an ounce. The NYSE Arca Gold Bugs Index bounced 1.71 per cent.
Copper rallied amid reports inventories in Shanghai warehouses are near 13-year lows. Benchmark copper on the London Metal Exchange advanced 1.2 per cent to US$8,170.75 a tonne. Aluminium gained 1.5 per cent and tin 0.1 per cent. Nickel shed 2.7 per cent, lead 1.9 per cent and zinc 0.3 per cent.
