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The biggest day of the corporate reporting season to date was set for a subdued start following a mixed close on Wall Street.
ASX futures edged up three points or 0.04 per cent as US stocks mostly overcame early weakness.
A revival of Russia-Ukraine tensions lifted oil and gold. Iron ore rebounded. The dollar climbed back above 72 US cents.
Almost a third of the heavyweights of the ASX 20 report today, including Telstra, Wesfarmers, Newcrest, Woodside Petroleum, Transurban and Goodman Group.
Wall Street
US stocks mostly overcame early weakness after the minutes from the latest Federal Reserve meeting soothed worries over a sharp increase in official rates next month. Stocks fell in morning action after NATO said there was no evidence of Russia withdrawing troops from the border with Ukraine, and as a surge in retail sales support the case for higher rates.
The S&P 500 firmed four points or 0.09 per cent. The Dow Jones Industrial Average trimmed its loss to 53 points or 0.15 per cent. The Nasdaq Composite eased 16 points or 0.11 per cent.
The minutes from the January Fed meeting showed policymakers preparing to raise rates, but gave no indication they were determined to lift by 50 basis points at the March meeting. Rates decisions will be taken on a meeting-by-meeting basis.
“Marketwise it’s not the barn burner it could have been,” Michael Schumacher, director rates at Wells Fargo, told CNBC. “I think this tells us very little about Fed policy.”
A relief rally lifted the market off its lows. The market opened underwater after NATO Secretary-General Jens Stoltenberg told reporters there was no signs of a Russian troop withdrawal. “What we see is that they have increased the number of troops and more troops are on their way,” he said.
Global equities rebounded yesterday on hopes of a diplomatic solution to the crisis after Russia indicated troops were returning to barracks.
“Investors are rethinking the rally that was prompted by Putin saying some Russian troops had returned to base,” Peter Cardillo, chief market economist at Spartan Capital Securities, told MarketWatch. “I think it’s a rethinking of the geopolitical situation.”
Also weighing in early action was a surge in retail sales as stimulus cheques hit bank accounts. Retail spending increased by 3.8 per cent in January, almost twice the 2.1 per cent growth anticipated by economists. The spending splurge added to evidence of an over-heating economy. Separate reports on industrial output and import prices also supported rate increases.
European markets closed broadly flat as investors awaited clarity on the Russia-Ukraine situation. The Stoxx 600 edged up 0.04 per cent. The main indices in the UK, Germany and France declined 0.1-0.3 per cent.
Australian outlook
Corporate earnings will once more set the tone on the ASX following a choppy session in the US. A slew of updates are due this morning from Wesfarmers, Telstra, Transurban, Newcrest, Woodside Petroleum, Goodman Group, South32, Magellan, Tabcorp, Whitehaven Coal, Crown Resorts, Star Entertainment, Origin Energy, Growthpoint Properties, Data#3 and Challenger.
The S&P/ASX 200 has marched to its own drum in recent sessions as a mostly positive earnings season overshadows overseas headwinds. The benchmark jumped 1.08 per cent yesterday as several out-of-favour companies delivered upside surprises, including CSL, retail landlord Vicinity Centres and Treasury Wine Estates.
“You know it’s a good day for the ASX 200 when over 80% of its stocks rallied. And it could have notched up more than the 1% it did, were it not for the Materials and Energy sectors posting losses on the day,” City Index senior market analyst Matt Simpson said.
“9 of the 11 ASX 200’s sectors posted gains, and the index closed at the high of the day to make a point. 7300 and 7340.4 remain key levels for bulls to conquer over the near-term, although we’d like to see any breakout accompanied with above-average volume to attain conviction.”
The overnight action did little to clear the uncertainties holding equity markets back. The Fed minutes were welcomed more for what they did not say, than what they said. Russia appeared to be toying with the west by saying one thing and doing another.
Energy and materials were the pick of the US sectors. Energy gained 0.76 per cent, materials 0.65 per cent and industrials 0.52 per cent. Financials finished flat. Tech and communication services ticked down around 0.2 per cent.
Back home, the January employment report at 11.30 am AEDT is expected to confirm a slowdown in the post-lockdown jobs boom on the east coast. The consensus among economists is for the jobless rate to hold steady at 4.2 per cent with the economy creating zero new jobs.
The dollar caught a tailwind from the Fed minutes, rising 0.76 per cent to 72.02 US cents.
Commodities
Gold booked its strongest finish in eight months as the threat of a Russia-Ukraine conflict remained. Metal for April delivery settled US$15.30 or 0.8 per cent higher at US$1,871.50 an ounce.
The yellow metal added to gains following the release of the Fed minutes this morning. The April contract was lately trading at US$1,873.60. The NYSE Arca Gold Bugs Index rallied 3.48 per cent.
“Geopolitical tensions surrounding Ukraine have been the latest catalyst to propel gold to fresh 2022 highs,” analysts at Sevens Report Research wrote.
Oil shrugged off an increase in US inventories as US President Joe Biden insisted a Russian invasion of Ukraine remained “distinctly possible”. Brent crude settled US$1.53 or 1.6 per cent ahead at US$94.81 a barrel.
Prices retreated during the previous session after Russia said it was sending troops back to barracks. Analysts said the Russian invasion “risk premium” could lift oil over US$100 a barrel in the event of an attack, or send it below US$90 if Moscow backs down.
Iron ore clawed back a portion of Tuesday’s heavy loss, bouncing 2.9 per cent to US$140 a tonne. Prices skidded 8.7 per cent during the previous session after Chinese regulators dragged producers in for a lecture on price gouging.
BHP‘s US-traded depositary receipts rallied 1.77 per cent. The Big Australia’s UK listing gained 1.94 per cent. Rio Tinto rose 1.84 per cent in the US and 1.1 per cent in the UK.
Industrial metals were little changed in London as traders awaited greater clarity on US rates and the Russia-Ukraine crisis. Benchmark copper on the London Metal Exchange eased 0.05 per cent to US$9,964 a tonne. Nickel edged up 0.24 per cent. Aluminium and tin were unchanged. Lead shed 0.37 per cent and zinc 0.29 per cent.
