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The ASX was poised to open lower after Wall Street ended its worst quarter in two years with an overnight loss as inflation and Ukraine war worries persisted.
ASX futures eased 42 points or 0.56 per cent, signalling early pressure as a new quarter gets underway. The S&P/ASX 200 fell 15 points or 0.2 per cent yesterday to its first loss in eight sessions.
Crude oil fell after the US announced plans to release strategic reserves. Iron ore and gold rose. Most industrial metals retreated.
Wall Street
US stocks faded to a second straight loss at the end of a volatile quarter dominated by rising prices, a deteriorating rates outlook and a war in Europe. The main indices closed at session lows after Russia threatened to cut off gas supplies to Europe unless paid in rubles.
The S&P 500 dropped 72 points or 1.57 per cent. The Dow Jones Industrial Average shed 550 points or 1.56 per cent. The Nasdaq Composite lost 222 points or 1.54 per cent.
The declines capped the first losing quarter since the first quarter of 2020 when the pandemic started. The S&P 500 has fallen almost 5 per cent since the start of the year, the Dow 4.6 per cent and the Nasdaq Composite 9.1 per cent.
“There’s been a nice relief rally, partly on beginning to look past the invasion, some clarity around central bank actions, and some technical buying, as there was a lot of money on the sidelines,” Erik Knutzenthe chief investment officer for multi-asset class strategies at Neuberger Berman, said.
“But we think from here investors are going to, at some point, realize, wait a second, growth is slowing and interest rates are rising and inflation is still high. This is still a challenging set-up for equities.”
Data last night showed inflation remained elevated, albeit not quite as high as economists anticipated. The Federal Reserve’s preferred measure, the Personal Consumption Index, climbed 0.6 per cent in February to a 40-year peak. The rise lifted the annual increase in prices from to 6.4 per cent from 6.2 per cent in January. Core prices came in just shy of expectations.
First-time claims for unemployment benefits were slightly higher than expected at 202,000 last week. The median estimate among economists surveyed by Dow Jones was 196,000.
Energy stocks retreated with crude after the White House mapped out a major release of national reserves to depress fuel prices. Officials said President Joe Biden intends to release a million barrels per day for the next six months.
Brent crude settled US$4.99 or 4.4 per cent lower at US$108.46 a barrel. The US benchmark, West Texas Intermediate, dropped US$4.47 or 4.2 per cent to US$103.35. Gasoline and heating oil also declined.
Natural gas prices rose after Russian President Vladimir Putin said customers for Russian natural gas would have to pay in rubles.
Australian outlook
An over-extended market looks set for a breather after an extraordinary rally through to the end of the quarter. Institutional investors skimmed a little cream off the top in last night’s closing auction, pushing the ASX 200 down 0.2 per cent. Futures action indicates additional pressure today.
Buoyant commodity prices helped lift the Australian benchmark to about 1 per cent of a record yesterday. Continued strength could see the ASX join Canada, another mining-heavy market, at an all-time high in the days ahead.
The ASX significantly outperformed Wall Street over the first three months of the year, thanks to the lift from commodities. The ASX 200 put on 0.7 per cent, versus a 4.9 per cent loss for the S&P 500.
US miners retreated overnight. The materials sector fell 1.35 per cent. Energy also declined, but the loss of 1.39 per cent was by no means the worst.
That unwelcome honour fell to financials, down 2.32 per cent as long-term borrowing rates fell for a fourth session.
Defensive sectors outperformed before turning negative in the final minutes of trade. Utilities and consumer staples were the pick of a bad bunch with losses of less than 0.5 per cent.
Back home, the Australian Industry Group releases March manufacturing data at 8.30 am AEDT. Caixin releases Chinese manufacturing data at 12.45 pm.
The dollar declined 0.16 per cent to 74.87 US cents.
Commodities
Gold wrapped up a positive month and quarter with a gain as last night’s US inflation figures and the Russia-Ukraine war kept havens well supported. Metal for June delivery settled US$15 or 0.8 per cent ahead at US$1,954 an ounce. The NYSE Arca Gold Bugs Index shed 0.54 per cent.
“Gold will remain headline driven and seems poised to make another run higher as the latest Russian move on gas contracts suggests a breakthrough in peace talks seems very far away,” Edward Moya, senior market analyst at Oanda, said.
Iron ore rose on the Dalian Commodity Exchange. The most-traded contract closed 3.3 per cent ahead at 897 yuan. The spot price for ore landed in China eased four US cents or less than 0.1 per cent to US$150.84 a tonne.
BHP‘s US-traded depositary receipts fell 1.13 per cent. The Big Australian’s UK listing shed 1.07 per cent. Rio Tinto dipped 0.11 per cent in the US after inching up 0.08 per cent in the UK.
Most industrial metals reversed some of Wednesday’s bounce after data showed Chinese factory activity contracted last month. Aluminium shed 2.34 per cent on the London Metal Exchange, nickel 1.46 per cent, lead 1.05 per cent and zinc 0.27 per cent.
Copper was unchanged at US$10,367 a tonne. Tin rose 0.98 per cent.
