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Aussie shares were poised to open higher despite a mixed end to last week on Wall Street as a new corporate earnings season got off to a disappointing start.
ASX futures rallied 28 points or 0.38 per cent, signalling a partial recovery from last week’s slump. The S&P/ASX 200 sealed a second straight losing week with a fall of 80.5 points or 1.08 per cent on Friday.
Oil rose for a fourth week. Iron ore, gold and copper eased on Friday. Nickel hit a decade high.
Trading volumes today will likely be impacted by a long weekend in the US for the Martin Luther King Jr public holiday.
Wall Street
US stocks closed mixed as poorly-received earnings updates from major banks clouded the launch of a new quarterly reporting season. The major indices logged a second week of losses for 2022 as investors grappled with looming rate rises and red-hot inflation.
The Dow Jones Industrial Average fell 202 points or 0.56 per cent. The S&P 500 edged up four points or 0.08 per cent. The Nasdaq Composite outperformed with a rise of 87 points or 0.59 per cent.
JPMorgan Chase was the biggest drag on the Dow, diving 6.15 per cent. Shares fell after the financial sector bellwether gave weaker forward guidance than some investors anticipated.
Citigroup dropped 1.25 per cent on a decline in quarterly profit. Asset manger BlackRock dipped 2.19 per cent as revenue came in shy of the consensus. Wells Fargo bucked the trend with a rise of 3.68 per cent.
The results weighed on the broader financial sector. AmEx fell 2.82 per cent, Goldman Sachs 2.52 per cent and Bank of America 1.74 per cent.
“The one thing that really jumps out is expense growth. You saw that in both Wells Fargo’s and JPMorgan’s numbers,” Gerard Cassidy, bank analyst at RBC Capital Markets, told CNBC.
The Nasdaq led after Netflix announced subscription increases in the US and Canada. Shares in the streaming service popped 1.25 per cent.
All three indices came under early pressure after a report showed consumers tightened their wallets last month as prices rose and omicron caused shortages. December retail sales declined 1.9 per cent, the biggest setback in ten months.
A separate report showed consumer sentiment collapsed to its second lowest in a decade. The University of Michigan’s sentiment index fell to 68.8 this month from 70.6 in December.
“While the Delta and Omicron variants certainly contributed to this downward shift, the decline was also due to an escalating inflation rate,” Richard Curtin, chief economist of the survey, wrote.
Wall Street has yet to record a weekly advance this year as the Federal Reserve prepares to raise official rates to contain soaring prices. The S&P 500 and Dow have fallen for two weeks. The Nasdaq is on a three-week losing run.
Australian outlook
The S&P/ASX 200 will try to claw back some of Friday’s losses while Americans enjoy a long weekend. Wall Street will remain closed tonight for a public holiday.
Equities on both sides of the Pacific have started the year with two weeks of losses. However, damage has been modest here so far: 51 points or less than 1 per cent since January 1.
Energy and technology were the pick of the US sectors on Friday. Energy stocks surged 2.45 per cent as a rally in crude continued. Tech gained 0.89 per cent.
The biggest weights were real estate, down 1.18 per cent, financials, down 1.01 per cent and materials, down 0.83 per cent.
The December employment report released on Thursday is this week’s highlight on the domestic economic calendar. The jobless rate is expected to tick down to 4.5 per cent from 4.6 per cent in November. The consensus among economists is for jobs growth of around 60,000.
Also this week: weekly consumer confidence (Tuesday); monthly consumer sentiment (Wednesday); and monthly inflation expectations (Thursday).
Corporate earnings will likely set the tone for the rest of the week on Wall Street. Heavyweights reporting this week include Goldman Sachs, Bank of America, Netflix, Procter & Gamble, United Airlines and Travelers.
China releases quarterly GDP figures at 1 pm AEDT today, along with monthly measures of industrial production, retail sales and unemployment.
Back home, mining giant BHP holds its annual general meeting in Melbourne on Thursday. Australian Pharmaceutical Industries also holds its AGM that day.
US giant Block (formerly Square) is due to complete its acquisition of Afterpay on Thursday and will trade on the ASX from 11 am that day.
IPOs: a busy week kicks off with Vertex Minerals at 10.30 am AEDT, followed by Beforepay Group at 11 am. Vertex is a Perth-based gold explorer. Beforepay is a Pay on Demand provider offering advances on salaries for a fixed fee.
The rest of the week currently looks like this: ChemX Materials (Tuesday); NICO Resources, Virdis Mining and Minerals (Wednesday); Felix Gold, Killi Resources (Thursday); and Belararox, Orexplore Technologies and WA1 Resources (Friday).
The dollar bounced 0.65 per cent this morning to 72.31 US cents.
Commodities
Mining giants BHP and Rio Tinto retreated with iron ore and copper. BHP‘s US-listed stock eased 0.19 per cent after the miner’s UK-listed stock dropped 0.96 per cent. Rio Tinto shed 0.34 per cent in the US and 1.3 per cent in the UK.
The spot price for iron ore landed in China fell US$1.20 or 0.9 per cent to US$126.75 a tonne. Benchmark copper on the London Metal Exchange slid 2.4 per cent to US$9,730.25 a tonne.
Nickel extended its bright start to the year. Benchmark prices on the LME rose 0.7 per cent to US$22,579.50 an ounce. The battery component metal gained around 7 per cent last week amid signs of rising demand.
“There has been double- and even triple-digit growth in energy-transition related areas,” ING senior commodities strategist Wenyu Yao said. “On Wednesday, the China Passenger Car Association (CPCA) released its latest data for December on new energy vehicles (NEV), with retail sales growing 129% Year-on-Year. Total NEV sales in 2021 grew by 169%. Such strong growth has bumped up demand for batteries.”
Also on the LME, aluminium put on 1.2 per cent. Lead gave up 0.4 per cent, zinc 1.3 per cent and tin 0.4 per cent.
Oil sealed a fourth straight weekly advance as tensions between Russia and the Ukraine threatened to disrupt European energy markets. Brent crude settled US$1.59 or 1.9 per cent ahead at US$86.06 a barrel.
“The possibility of an armed conflict is a serious development, and has wide geopolitical ramifications, thereby boosting oil price premiums,” Manish Raj, chief financial officer at Velandera Energy Partners, told MarketWatch.
Gold trimmed its fifth winning week in six. Metal for February delivery settled US$4.90 or 0.3 per cent lower at US$1,816.50 an ounce. The NYSE Arca Gold Bugs Index eased 1 per cent.
For the week, gold gained 1.1 per cent, resuming an uptrend that delivered four straight weekly gains in December.
