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The share market was poised to open lower following losses on Wall Street on reports corporate bellwether Apple was preparing for an economic slowdown.  

A rebound in commodity prices partly cushioned ASX futures against US losses. September SPI 200 futures eased 21 points or 0.32 per cent. 

Oil bounced back above US$100 a barrel. Iron ore and industrial metals recovered from multi-month lows after China stepped up support for its struggling property market. Gold also rose. The dollar regained 68 US cents.

Wall Street

US stocks opened higher on well-received earnings from Goldman Sachs and Bank of America. The session turned negative after Bloomberg reported Apple planned to cap spending and slow hiring ahead of a potential downturn in the global economy.

The Dow Jones Industrial Average finished 216 points or 0.69 per cent lower after being up as much as 356 points. The S&P 500 shed 32 points or 0.84 per cent. The Nasdaq Composite lost 92 points or 0.81 per cent.

Apple, the world’s largest company by market valuation, fell 2.06 per cent. Bloomberg said plans to reduce spending and hiring only applied to certain units and was not a company-wide policy. Still, the prospect sent shivers through the market because it followed similar reports about Tesla and Facebook owner Meta Platforms.

“Apple’s move reflects a broader slowdown in investing in new things, new companies and new products,” Kim Forrest, chief investment officer at Bokeh Capital Partners, told Reuters. “It signifies that inflation is an issue for these companies.”

Earlier, the financial sector steered the market higher as the big banks continued to beat expectations. Goldman Sachs rose 2.51 per cent as a strong performance from its fixed-income division helped offset a poor quarter for mergers and acquisitions. Bank of America finished near flat, up 0.03 per cent, after beating analyst expectations.

Analysts expect corporate profits to increase by an average 4.2 per cent this quarter, according to FactSet data. Revenues were expected to improve by around 10.2 per cent. However, market reaction is likely to be determined by forward guidance.

“We expect the results to be generally okay,” Terry Sandven, chief equity strategist at US Bank Wealth Management, said. “Focus will primarily be on margins and to the extent to which companies are able to pass along higher input costs, that’ll dictate where perhaps valuations can go.”

Earnings seasons are typically choppy as the market reacts to each fresh piece of information. Hardware giant IBM fell 3.71 per cent this morning in extended trade after shaving its cashflow guidance.

“We anticipate volatility to remain elevated as the market toggles between pricing recession risk and soft landing probabilities with each piece of data,” Citi’s Scott Chronert wrote.

Stocks rallied at the end of last week as fears of a 1 percentage point increase in official rates next week died down. Futures markets have priced in a 75 bp increase in the federal funds rate target.

Australian outlook

The S&P/ASX 200 looks set to give back some of yesterday’s 1.23 per cent surge following a session-long fade on Wall Street. There have been tantalising signs of dip-buying in recent US action, but last night marked a return to an old-fashioned bear market ‘Sell the rally’.  

The sell-off took down eight of eleven US sectors. A surge in treasury yields pulled the rug from under equities that attract institutional fund flows when yields weaken. The healthcare sector dropped 2.15 per cent, utilities 1.4 per cent and real estate 1.08 per cent. Rate-sensitive Big Tech also declined.

The financial sector gave up its gains, falling 0.53 per cent despite another round of supportive earnings.

Energy was the best of the sectors, rising 1.96 per cent as US oil regained US$100 a barrel for the first time in a week. Materials held on for a gain of 0.22 per cent following a recovery in industrial metals.

Mining behemoth BHP releases a fourth-quarter trading update today. Overnight, the miner’s US-traded depositary receipts bounced 2.84 per cent and its UK listing firmed 3.12 per cent. Rio Tinto improved 2.22 per cent in the US and 2.88 per cent in the UK.

On the economic calendar, the minutes from this month’s Reserve Bank policy meeting at 11.30 am AEST should shed further light on the outlook for interest rates. Deputy Governor Michele Bullock is scheduled to address a business lunch in Brisbane today. Weekly consumer confidence results are also due this morning.

The dollar held its ground above 68 US cents, trading unchanged this morning at 68.13 US cents.

Commodities

Iron ore and industrial metals recovered some of last week’s losses as Chinese authorities sought to soothe worries over the nation’s faltering property sector.

Regulators urged lenders to extend loans to developers to stave off a consumer-led mortgage payment boycott of unfinished projects. The governor of the Bank of China pledged “prudent monetary policy” to support the economy.

The most-traded iron ore contract on the Dalian Commodity Exchange bounced 2.2 per cent to US$100.63 a tonne. The spot price for ore landed in China rallied US$2.19 or 2.1 per cent to US$105.26 a tonne.

Copper rebounded from its weakest price since November 2020. Benchmark copper on the London Metal Exchange rallied 3.2 per cent to US$7,411 a tonne. Prices traded as low as US$6,955 on Friday.

“This is still a bear market bounce, and it’s too early to predict whether this will turn into consolidation and a recovery,” Ole Hansen, head of commodity strategy at Saxo Bank, said.

“The market was increasingly oversold, where short-sellers were looking for an excuse to cover shorts and they found that today with the China story and the weaker dollar,” he added.

Aluminium put on 3.6 per cent, nickel 6.6 per cent, lead 2.5 per cent and zinc 3.8 per cent. Tin eased 0.6 per cent.

Oil prices charged back above US$100 a barrel after US President Joe Biden’s trip to Saudi Arabia failed to produce news of increased production. Brent crude settled US$5.11 or 5.1 per cent higher at US$106.27 a barrel. The US benchmark climbed 5.1 per cent to US$102.60.

“Traders got one clear message from Biden’s recent visit to Saudi Arabia, during which President Biden spoke to a number of Arab leaders. The message is that it is OPEC+ that makes the oil supply decision, and the cartel isn’t remotely interested in what Biden is trying to achieve,” Naeem Aslam, chief market analyst at AVATrade, said.

Gold drew strength from a respite in the rally of the US dollar index to 20-year highs. Gold for August delivery settled US$6.60 or 0.4 per cent ahead at US$1,710.20 an ounce. The NYSE Arca Gold Bugs Index rose 0.85 per cent.

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