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A stop-start week looks set for another setback following a mixed finish on Wall Street.
ASX futures declined 33 points or 0.5 per cent ahead of the busiest day of the interim reporting season so far. Telstra, AMP and Newcrest were among the big names due to release earnings.
US stocks finished little changed in volatile trade. Iron ore, oil and gold rallied. Copper scored its highest finish in eight years. The dollar held broadly steady above 77 US cents.
Wall Street
US stocks marked time for a second night as Federal Reserve Chair Jerome Powell reaffirmed the central bank’s long-term commitment to support the economic recovery. Powell said the labour market required a “patiently accommodative monetary policy”. His comments came as benign inflation data soothed fears the bank might have to rein in stimulus efforts to restrain prices.
The S&P 500 eased a point or 0.03 per cent. The Dow Jones Industrial Average gained 62 points or 0.2 per cent and a new closing high amid a gentle rotation into value stocks from growth sectors. The Nasdaq Composite dipped 35 points or 0.25 per cent as Apple, Amazon and Microsoft declined.
Powel said the official unemployment rate of 6.3 per cent “dramatically understated” the real picture. The true figure was nearer 10 per cent, he said.
“Despite the surprising speed of recovery early on, we are still very far from a strong labour market whose benefits are broadly shared,” he said.
Wall Street lost momentum this week amid concern unprecedented fiscal and monetary stimulus measures may ignite inflation, forcing the Fed and Treasury to curtail support. However, last night’s January inflation report set off no alarms. The consumer price index increased 0.3 per cent, in line with expectations. Core inflation – excluding volatile energy and food – was flat.
Cannabis stocks surged as the Reddit trading community bet a Biden administration will legalise weed. Tilray surged 50.9 per cent, Aphria 10.7 per cent and Aurora Cannabis 21.1 per cent.
“We believe the rally in Canadian names is mostly driven by retail investors, maybe fuelled by Robinhood and Reddit,” Pablo Zuanic, analyst at Cantor Fitzgerald, told CNBC. “I’m not going to say it’s a GameStop type of case but the Canadian rally is not entirely based on fundamentals.”
The broader market saw a mild rotation from the growth stocks of the Nasdaq back to value stocks that trailled during the pandemic recovery. The Russell 1000 Value Index gained 0.1 per cent, versus a 0.21 per cent decline in the Russell 1000 Growth Index.
Australian outlook
Equity markets have grown choppy this week in the absence of fresh catalysts. The S&P/ASX 200 has moved in a different direction each session, a sign of indecision after last week’s blistering start to the month. Futures action suggests a reversal today following yesterday’s 36-point recovery.
How the day plays out will depend to some extent on the reaction to half-year updates. Three of the heavyweights of the S&P/ASX 20 report today: Transurban, Telstra and Newcrest. ASX 200 companies scheduled to report include AMP, ASX, AGL, Beach Energy, Downer EDI and Magellan (sources: CommSec, ABC).
The local cannabis sector surged yesterday as some of the Reddit-fuelled US mania ignited buying interest here. Cann Global climbed 33.3 per cent, Creso Pharma 23.3 per cent, Elixinol 17 per cent, Botanix Pharma 15.4 per cent, Cann Group 15.4 per cent and Little Green Pharma 15.3 per cent.
Energy was the pick of the US sectors overnight, rising 1.8 per cent as oil climbed for a ninth night. A decline in US bond yields helped traditional alternative investments: real estate, utilities and health all edged higher. Financials dipped almost 0.1 per cent and materials 0.2 per cent.
Several major Asian markets, including China and Japan, close today for the start of the Lunar New Year. Trade on Chinese markets is suspended until next Thursday. The shutdown tends to have a depressive effect on trading volumes in the region. Some funds may find their way to the ASX.
The dollar eased 0.25 per cent to 77.21 US cents.
Commodities
An unexpected dive in US crude stockpiles helped oil extend its longest winning run in 13 months. Brent crude settled 38 cents or 0.6 per cent higher at US$61.47 a barrel, its ninth straight advance. US crude supplies dropped by 6.6 million barrels last week, much more than analysts anticipated.
Copper logged its strongest finish since 2013 amid expectations for strengthening demand as the global economic recovery gathers pace. US-traded copper rose five cents or 1.4 per cent to US$3.7725 a pound. Platinum rose 4.4 per cent to a six-year peak.
“Industrial metals like copper and platinum racked up eight year and six year highs, respectively, as dealers are banking on a robust recovery in the world economy,” David Madden, market analyst at CMC Markets UK, told MarketWatch.
Gold improved for a fourth session, supported by a weakening greenback. Metal for April delivery settled $5.20 or 0.3 per cent higher at US$1,842.70 an ounce. The NYSE Arca Gold Bugs Index eased 0.2 per cent.
BHP and Rio Tinto were lifted by strength in industrial metals and iron ore. The spot price for ore landed in China advanced $2.50 or 1.5 per cent to US$165.95 a tonne ahead of the Lunar New Year shutdown. BHP’s US-listed stock put on 0.16 per cent and its UK-listed stock 1.25 per cent. Rio Tinto added 2.04 per cent in the US and 2.63 per cent in the UK.
