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Aussie shares were set to open modestly lower following a mixed close on Wall Street as crumbling cryptocurrency prices weighed on tech stocks.

The Nasdaq Composite declined as a rebound in Bitcoin faltered. Gains in industrial stocks following upbeat manufacturing data boosted the Dow. The S&P 500 closed little changed.

ASX futures eased five points or 0.07 per cent. Iron ore slumped more than 5 per cent. Gold and other metals declined. Oil rebounded.

Wall Street

A volatile week ended with the major indices at variance as investors weighed record manufacturing activity against inflation worries and the unravelling cryptocurrency market.

The Dow Jones Industrial Average was the pick of the indices, rising 123 points or 0.36 per cent.

Boeing shares climbed 3.15 per cent on news the aircraft manufacturer plans to ramp up production of its 737 MAX next year. Heavy machinery giant Caterpillar was lifted by a record reading in a key manufacturing gauge. The IHS Markit Flash Manufacturing PMI jumped to 61.5 this month.

The strength of the report sharpened concerns about inflation and the outlook for rates, pressuring growth stocks.

“The first major economic data point for the month of May was very strong,” Adam Crisafulli, founder of Vital Knowledge, wrote. “We already know the Fed is thinking about tapering and this release may cause them to think about it a bit harder, but stocks should be fine so long as the Fed doesn’t signal a taper before Nov.”

The growth stock-heavy Nasdaq Composite dropped 65 points or 0.48 per cent. Companies with exposure to cryptocurrency markets declined after China’s Vice Premier called for a crackdown on mining and trading digital coins. The State Council issued a statement saying it would “crack down on Bitcoin mining and trading behavior, and resolutely prevent the transmission of individual risks to the social field.” The US Treasury Department announced fresh restrictions last week to ensure cryptos were not used for tax evasion.

Crypto trading platform Coinbase sank 3.88 per cent. Miner Riot Blockchain shed 5.54 per cent. Tesla, which has significant Bitcoin holdings, lost 1.01 per cent.

The sell-off in digital tokens continued over the weekend. Bitcoin was last down 11.5 per cent at US$33,714 after falling as low as US$31,228 overnight. Other tokens were down as much as 20 per cent.

The S&P 500 gave up early gains to finish three points or 0.08 per cent in the red. The broadest of three major indices lost around 0.4 per cent last week, posting back-to-back weekly declines for the first time since February. The Dow lost 0.5 per cent for the week. The Nasdaq gained 0.3 per cent, its first weekly advance in five weeks.

Australian outlook

The prospects for the day ahead have been muddied by an accelerating sell-off in cryptos over the weekend. While Australia has limited direct exposure to those markets, anything that unsettles Wall Street is bad for risk appetite. Last week’s mid-week wobble was driven by the initial crypto collapse.

However, markets tend to adjust quickly to fresh developments, so it is possible the ASX will brush off the latest down-leg. The effect on US futures will determine how much of an impact weekend events have. Sharp declines in iron ore and copper may have more of an impact (see below).

Financials were the best of the US sectors on Friday, rising 0.9 per cent. Utilities +0.54 per cent and industrials +0.43 per cent were also strong. Materials eked out a gain of 0.27 per cent.

The economic calendar lightens as we near the end of the month. There are reports due on construction on Wednesday and private capital expenditure on Thursday. Both measures are important inputs into GDP. Thursday night looms as a potential market-mood changer in the US with GDP data, durable goods and jobless claims all coming on the same night.

AGMs this week include Resolute Mining, InvoCare, Spark Infrastructure, Alumina and Freedom Foods. Profit reports are due from Aristocrat Leisure, Mesoblast and Select Harvest.  

In the IPO pipeline this week are: DGL Group (today); BSP Financial Group, Pepper Money (Tuesday); and the delayed listing of Flynn Gold (Thursday).

The dollar started the week with a mild up-tick, rising 0.06 per cent this morning to 77.3 US cents.

Commodities

Iron ore accelerated its retreat from record levels following reports China has drafted a five-year plan to reduce its dependency on imports from Australia and other countries. The spot price for ore landed in China fell $10.75 or 5.1 per cent to US$200.10 a tonne.

BHP’s US-listed stock eased 1 per cent and its UK-listed shed 0.42 stock per cent. Rio Tinto gave up 1.07 per cent in the US and 0.56 per cent in the UK.

Copper extended its loss for the week to 3.7 per cent in the US. Comex-traded copper fell 1.9 per cent on Friday to US$4.48 a pound.

Gold‘s six-session winning run ended with a mild setback as traders took profits before the weekend. The yellow metal hit a four-month high last week as funds fled cryptos for the relative security of precious metals. Metal for June delivery settled $5.20 or 0.3 per cent lower at US$1,876.70 an ounce. The NYSE Arca Gold Bugs Index dipped 0.5 per cent.

Oil rose at the end of a  losing week as a storm forming in the Gulf of Mexico menaced production. Brent crude settled $1.33 or 2 per cent higher at US$66.44 a barrel. For the week, Brent declined around 3.3 per cent as progress in negotiations over Iran’s nuclear program threatened to bring more production onto the market.

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