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A spike in the dollar points to early pressure on Australia’s export-driven share market following a downbeat close in the US as stimulus talks dragged on.

ASX SPI200 index futures skidded 69 points or 1.1 per cent, signalling the market’s weakest open in more than a week.

Wall Street

US stocks marked time before a late dip as investors awaited clarity on negotiations for a new coronavirus relief package in Washington. The S&P 500 traded in and out of positive territory all session before finishing eight points or 0.22 per cent lower. The Dow Jones Industrial Average briefly gained more than 100 points, but finished 98 points or 0.35 per cent in the red. The Nasdaq Composite shed 32 points or 0.28 per cent.

While talks continued between the White House and Democrat House of Representatives Speaker Nancy Pelosi, Republican Senate Majority Leader Mitch McConnell firmed as an obstacle to a deal. The Washington Post reported the Republican veteran had urged the White House not to strike a deal for fear it will interfere with Supreme Court nomination hearings and highlight fissures within the Republican Party as an election looms.  

“The market’s maybe finally realising it’s not happening or if it does happen it’s going to happen after the election,” Michael O’Rourke, chief market strategist at JonesTrading in the US, told Reuters. “We’re not seeing a lot of panic or fear. Apathy is a good description.”

Pelosi and Treasury Secretary Steven Mnuchin spoke by phone this morning and were due to talk again tonight. Wall Street has been rising in recent weeks on expectations that a market-friendly stimulus package will eventuate either before or after the November 3 presidential election.

Netflix was a drag on the market, falling 6.9 per cent after missing earnings and reporting a slowdown in subscribers. Social media giant Snap soared 28.3 per cent after gaining more than twice as many users as analysts expected. The result helped lift Facebook 4.2 per cent and Alphabet 2.3 per cent.

Australian outlook

The ASX has held strong all week against overseas headwinds as exporters were supported by a gentle retreat in the dollar. The currency turned from tailwind to headwind overnight as the US dollar crumbled, reportedly on the basis that no stimulus deal now is worse for the greenback in the long run because it means a bigger relief package if the Democrats sweep next month’s election, as polls appear to indicate. The Aussie climbed almost 1 per cent to 71.17 US cents.

Today’s open will be the first genuine test of investors’ willingness to buy pullbacks following the market’s strong run since the start of the month. The S&P/ASX 200 looked set to open at its weakest level in eight sessions. The index edged up seven points or 0.1 per cent yesterday during a tight, range-bound session.

“From high to low, we traded in a 25-point trading range,” ThinkMarkets Market Analyst Carl Capolingua said. “It’s our second smallest trading range this year… Small trading ranges like this are reassuring considering the nice run we’ve had since the start of the month, and also given the growing uncertainty around Covid-19 lockdowns in Europe and a tightening in the US Presidential race. It shows that we’re holding firm, we’re consolidating those gains, and hopefully, it means we can start to move on our own accord after we work through those negatives.”

The Reserve Bank will be in the spotlight once again. Deputy Governor Guy Debelle is due to speak at FX Week via satellite at 9.30 am EST. Quarterly business confidence figures are due two hours later.

Just two US sectors resisted the downtrend: communication services gained 1.3 per cent and consumer staples 0.1 per cent. Energy, industrials and consumer discretionary all declined at least 0.6 per cent.

Commodities

A third straight advance lifted gold to its highest level in a month. Gold for December delivery settled $14.10 or 0.7 per cent ahead at US$1,929.50 an ounce. The move helped raise US gold miners. The NYSE Arca Gold Bugs Index rallied 1.2 per cent.

Copper claimed a new two-year high in US trade. Copper for December delivery advanced 1.6 per cent to US$3.1985 a pound, a level last seen in June 2018. On the London Metal Exchange, benchmark copper climbed 1.4 per cent to US$6,977.75 a tonne. Aluminium added 0.8 per cent, lead 2.8 per cent, zinc 1.6 per cent and tin 0.5 per cent. Nickel dropped 0.8 per cent.

Iron ore edged higher for a fourth session. The spot price for ore landed in China gained 90 cents or 0.8 per cent at US$120.40 a tonne. BHP’s US-listed stock put on 0.29 per cent after its UK-listed stock shed 0.17 per cent during a broader downturn on European markets overnight. Rio Tinto added 1.07 per cent in the US and lost 0.15 per cent in the UK.

The US energy sector reversed Tuesday’s gains, sinking 2 per cent on news US stockpiles declined less than expected last week. The US benchmark, West Texas Intermediate, tumbled 4 per cent to its lowest level in a week. The international benchmark, Brent crude, settled $1.43 or 3.3 per cent weaker at US$41.73 a barrel.

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