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Shares look set to open near a seven-month high after Wall Street mostly shrugged off a stimulus stalemate, grim benefits data and heavy falls in Europe amid fresh coronavirus restrictions.
ASX SPI200 index futures eased 13 points or 0.2 per cent, signalling a cautious start following a volatile 24 hours on overseas markets.
Wall Street
US stocks opened deep in the red as grim economic data underlined the need for more stimulus, but pared their losses as traders “bought the dip”. The Dow Jones Industrial Average finished 20 points or 0.07 per cent lower after being down more than 300 points.
The S&P 500 shed five points or 0.15 per cent in a third straight loss. The Nasdaq Composite gave up 55 points or 0.47 per cent after Goldman Sachs downgraded its recommendation for the technology sector to neutral.
First-time claims for unemployment benefits climbed 53,000 to a seven-week high of 898,000, exacerbating concerns the US economy has stalled since the first coronavirus relief package expired in August. Economists had expected the tally to fall to 825,000. Negotiations for a new stimulus package have bogged down in a three-way squabble between the White House, House Democrats and Senate Republicans.
“The significant increase in the unemployment claims is another warning sign for the US lawmakers to get their act together,” Naeem Aslam, chief market analyst at AvaTrade, told MarketWatch. “The sad fact is that this situation is only going to get worse if we do not get any help in terms of another stimulus package.”
Earlier, European stocks slumped as France and the UK imposed new restrictions to limit the spread of Covid-19. The pan-European Stoxx 600 lost 2.08 per cent. France’s CAC 40 index shed 2.11 per cent and Britain’s FTSE 100 lost 1.73 per cent.
Turmoil in Europe overshadowed a brighter set of US corporate quarterly updates. Morgan Stanley gained 1.1 per cent after strong trading helped the financial giant exceed revenue estimates by a billion dollars. Walgreens Boots Alliance was the Dow’s best performer, rising 4.8 per cent on increased sales at pharmacies.
Australian outlook
The S&P/ASX 200 looks set to open within a few points of yesterday’s seven-month closing high. The benchmark index climbed 31 points or 0.5 per cent yesterday to close above 6200 for the first time since March after RBA Governor Philip Lowe signalled a rate cut is likely next month or soon after.
A combination of rate expectations and government stimulus measures have helped the local market outperform Wall Street for the last two weeks. The benchmark index has put on more than 7 per cent in eight sessions. The 6200 barrier finally fell yesterday at the eighth attempt. Today provides another test of the market’s willingness to ignore overseas pressures and walk its own path.
Energy and financials were the pick of the US sectors, rising 1.2 per cent and 0.8 per cent, respectively. Tech stocks declined along with health, telecoms, materials and utilities.
The dollar was crushed by the move to “risk-off”, falling 0.7 per cent to 70.92 US cents.
Commodities
Oil wilted under the prospect of weaker demand under European lockdowns, then reclaimed most of its losses after a report showed US stockpiles dropped last week. The US Energy Administration reported a larger-than-expected decline of 3.8 million barrels due to the effects of Hurricane Delta. Brent crude settled 16 cents or 0.4 per cent lower at US$43.16 a barrel.
US gold stocks retreated despite a late reversal in gold. The NYSE Arca Gold Bugs index dropped 1.4 per cent as gold for December delivery settled $1.60 or 0.1 per cent ahead at US$1,908.90 an ounce after trading as low as US$1,892.70.
Trade in BHP and Rio Tinto over the last 24 hours reflected changes in market sentiment: up in Australia, down in Europe, down less in the US. BHP’s US-listed stock eased 0.21 per cent after its UK-listed stock shed 1.16 per cent. Rio Tinto dropped 0.74 per cent in the US and 1.07 per cent in the UK. The spot price for iron ore landed in China fell for a fourth session, down 85 cents or 0.7 per cent to US$18.90 a tonne.
Industrial metals largely rode out the storm, supported by ongoing signs of solid Chinese demand. Benchmark copper on the London Metal Exchange rose 0.5 per cent to US$6,738.15 a tonne. Aluminium added 0.3 per cent, nickel 0.5 per cent, zinc 0.4 per cent and tin 0.3 per cent. Lead gave up 1.3 per cent.
