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Shares trading at five-month highs face an early test as investors assess a slew of corporate earnings and a soft close on Wall Street after the Federal Reserve doused optimism over the economic outlook.
ASX SPI200 index futures retreated 15 points or 0.25 per cent as US stocks closed near session lows.
Earnings season
The S&P/ASX 200 climbed 44 points or 0.7 per cent yesterday to its highest finish since March 6, the second week of the COVID-19 market meltdown.
Corporate Australia’s ability to ride out the pandemic will come under the microscope once again this morning with full- or half-year earnings updates from Qantas, Wesfarmers, Santos and Medibank.
Today’s lengthy list also includes reports from South32, Domain Holdings, Webjet, Mirvac, Coca-Cola Amatil, Southern Cross Media, Star Entertainment, Perpetual, Sonic Healthcare, Origin Energy, Growthpoint Properties, Tassal Group and WPP AUNZ.
Wall Street
A positive night on Wall Street soured after the Fed injected a dose of economic reality into a market hovering at record levels. The S&P 500 fell 15 points or 0.44 per cent following the release of the minutes from the central bank’s July meeting.
“The ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term and was posing considerable risks to the economic outlook over the medium term,” the minutes noted.
The S&P 500 was trading at a new intraday high prior to the minutes and fell steadily afterwards. The Dow dropped 85 points or 0.31 per cent to a third straight loss. The Nasdaq shed 64 points or 0.57 per cent.
The Fed minutes emphasised the belief among board members that government needs to do more to support the economy. Negotiations over a new coronavirus relief package to replace measures that expired last month have stalled over the scope and focus of the package.
The minutes appeared to rule out the possibility of the bank employing bond purchases to control yields on government bonds. Bond yields rose with the US dollar after the minutes were released, while gold tumbled.
“The Fed was cautious in the minutes,” Mike O’Rourke, chief market strategist at Jones Trading in the US, told Reuters. “I think the fact that the Fed was not too warm on the yield-curve control and some of the extreme measures investors may have liked to see was a concern.”
Earlier the market was lifted by Apple‘s charge to become the first US company worth US$2 trillion. The consumer technology giant has put on almost 60 per cent this year as ‘Big Tech’ led the share market’s rebound to all-time highs. The stock closed just 0.13 per cent ahead, well off its session high.
All 11 US sectors finished lower. Real estate and energy took the biggest hits, falling 2 per cent and 1.2 per cent, respectively. Financials and technology fared best with declines of 0.1 per cent and 0.3 per cent.
Commodities
Gold skidded more than 2 per cent as the US dollar rallied. Metal for December delivery settled $42.80 or 2.1 per cent lower at US$1,970.30 an ounce and lately doubled its fall to US$1,931.50. Silver was down almost 5 per cent.
A two-year high in copper and a new six-year high in iron ore were not enough to shield BHP and Rio Tinto from the reversal. BHP’s US-listed stock fell 1.97 per cent and its UK-listed stock 0.29 per cent. Rio Tinto gave up 2.12 per cent in the US and 0.15 per cent in the UK.
The spot price for iron ore landed in China rose $1.20 or 0.9 per cent to US$128.80 a dry ton. Benchmark copper on the London Metal Exchange finished 1.8 per cent ahead at US$6,698.75 a tonne after trading above US$6,700 for the first time since June 2018. Aluminium added 1.3 per cent, nickel 0.4 per cent, lead 1 per cent, zinc 1.9 per cent and tin 0.3 per cent.
Oil marked time as traders awaited news from a meeting of the Organization of the Petroleum Exporting Countries and allies that is expected to retain production caps. Brent crude settled nine cents or 0.2 per cent lower at US$45.37 a barrel. The US benchmark edged up four cents or 0.1 per cent.
The dollar skidded 0.82 per cent to 71.81 US cents.
