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The ASX was poised to open little changed as strong gains in commodity prices help offset a third straight decline on Wall Street as inflationary pressures persisted.

US stocks gave up early gains after March consumer price data did little to alter the outlook for sharply higher rates. Growth stocks led the reversal.   

Crude oil bounced more than 6 per cent after China relaxed Covid restrictions. Iron ore and industrial metals also rallied. Gold logged its highest close in a month.  

ASX futures dipped seven points or 0.1 per cent. The S&P/ASX 200 fell to a two-week low yesterday.

Wall Street

Early optimism fuelled by better-than-expected core inflation figures gave way to further selling as the Federal Reserve indicated it remained committed to a series of rate hikes.

The S&P 500 faded to a loss of 15 points or 0.34 per cent after being up as much as 1.3 per cent. The Dow Jones Industrial Average fell 88 points or 0.26 per cent, reversing an initial gain of more than 360 points. The Nasdaq Composite shed 40 points or 0.3 per cent.

Early buyers were encouraged by a mixed March inflation report. The consumer price index topped Wall Street’s estimates with an increase of 8.5 per cent from a year ago. However, core CPI (which excludes food and energy) surprised to the upside with a smaller-than-expected increase of 0.3 per cent for the month. Economists anticipated a gain of 0.5 per cent.

“The big news in the March report was that core price pressures finally appear to be moderating,” Andrew Hunter, senior US economist at Capital Economics, wrote.

Treasury yields backed off three-year highs. The ten-year yield fell more than six points before stabilising.

Initial optimism wavered after Fed Governor Lael Brainard said the central bank remained committed to moving “expeditiously” this year on monetary policy. Brainard told the Wall Street Journal getting inflation back down to the bank’s 2 per cent target was its “most important task”.  

Last night’s slowdown in core inflation was “welcome”, but she would need “to see whether we continue to see moderation in the months ahead”.

“While today’s report is encouraging, the Fed is a long way away from claiming victory and will have to remain in inflation-fighting mode,” investment bank Jefferies said.

Several tech heavyweights switched from market-leaders to drags. Nvidia shed 1.88 per cent, Microsoft 1.12 per cent, Meta Platforms 1.07 per cent and Alphabet 0.86 per cent.

Bank stocks fell with yields. JPMorgan Chase is due to release earnings tonight as a new quarterly reporting season gets underway.

Energy producers jumped with crude prices after China announced it would lift restrictions on parts of Shanghai where no new infections had been reported for two weeks. Marathon Oil spiked 4.16 per cent, Devon Energy 3.71 per cent and Chevron 2.08 per cent.

Australian outlook

The commodities safety net looks set to save the ASX once again from mirroring losses on Wall Street. Crude, ore and metals all jumped on a relaxing of China’s Covid lockdown. BHP and Rio Tinto rallied in overseas trade (more below).  

The S&P/ASX 200 will start the session near its weakest level in two weeks after yesterday’s slide. The Australian benchmark dropped 0.42 per cent as a broad sell-off lowered all 11 sectors.

Energy stocks led in the US and should deliver similar gains here. The US sector surged 1.72 per cent, the only advance of any magnitude. Utilities firmed 0.41 per cent, consumer discretionary 0.2 per cent and materials 0.03 per cent.

Banks loom as a potential drag after last night’s core inflation report lowered long-term borrowing costs. US financials fell 1.07 per cent, the night’s worst performance. Other notable declines included health -0.95 per cent and tech -0.35 per cent.

On the domestic economic calendar, monthly consumer sentiment and quarterly building activity reports are due today. Mineral sands miner Iluka Resources holds its annual general meeting.

IPOs: Firetail Resources lists at 12 pm AEST. This explorer is targeting battery metals at projects in WA and Queensland. The listing of Narryer Metals originally pencilled in for today has been pushed back until tomorrow.

The dollar bounced 0.55 per cent to 74.55 US cents.

Commodities

Oil logged its highest close in a week as buyers bet headwinds from China’s Covid restrictions were easing. Brent crude settled US$6.16 or 6.3 per cent ahead at US$104.64 a barrel. The US benchmark jumped 6.7 per cent to US$100.60.

Chinese authorities announced yesterday they would relax a two-week lockdown in Shanghai. Roughly a quarter of the city’s 25 million people will be allowed outdoors.

The news offered oil traders a “light at the end of the tunnel trade,” according to Stephen Innes, managing partner at SPI Asset Management.

Iron ore and industrial metals also rebounded. The spot price for ore landed in China climbed US$2.65 or 1.7 per cent to US$155.83 a tonne.

Benchmark copper on the London Metal Exchange rallied 1.4 per cent to US$10,326.25 a tonne. Aluminium gained 0.5 per cent, lead 1 per cent and zinc 1.9 per cent. Nickel prices were unchanged. Tin eased 1.6 per cent.

BHP‘s US-traded depositary receipts firmed 1.49 per cent. The miner’s UK listing improved 2.17 per cent. Rio Tinto gained 0.94 per cent in the US and 1.38 per cent in the UK.

Gold extended its rally into a fourth session as last night’s US inflation data did little to undermine demand for hedges. Metal for June delivery settled US$27.90 or 1.4 per cent higher at US$1,976.10 an ounce. The NYSE Arca Gold Bugs Index gained 0.62 per cent.

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