A flat finish on Wall Street points to a subdued start to Australian trade following disappointing jobs data and a resurgence in coronavirus cases in the US.
ASX SPI200 index futures eased five points or 0.1 per cent as the major US indices closed mixed but little changed.
The S&P 500 edged up two points or 0.06 per cent after flip-flopping around break-even for much of the night. The Dow fell for a second day, losing 40 points or 0.15 per cent. The Nasdaq continued to outperform, rising 33 points or 0.33 per cent to a fifth straight gain.
Hopes of a V-shaped economic recovery were dented by stubbornly elevated claims for unemployment benefits. One and a half million Americans lodged first-time claims for benefits last week, significantly higher than the 1.3 million expected by economists. Continuing claims fell a paltry 62,000 to around 20.5 million.
“It’s not clear why claims are still so high,” Ian Shepherdson, chief economist at Pantheon Macroeconomics in the US, told MarketWatch. “Is it the initial shock still working its way up through businesses away from the consumer-facing jobs lost in the first wave, or is it businesses which thought they could survive now throwing in the towel, or both? Either way, these are disappointing numbers and serve to emphasise that a full recovery is going to take a long time.”
Investors kept a wary eye on signs COVID-19 has not been contained in several US states. California, Texas and Arizona all reported troubling statistics around hospitalisations and new infections even as President Donald Trump declared there would not be a second shutdown. China closed schools and cancelled flights after an outbreak in Beijing.
The main trading theme overnight was a muted version of the session before: big tech up, recovery plays down. Amazon, Microsoft, Facebook and Netflix inched higher. An index of airlines dropped 0.5 per cent. The Dow was held back by declines in AmEx, Goldman Sachs, Walmart and Pfizer.
Some commentators pointed to buyer fatigue following almost three months of strong gains since the March pandemic lows.
“It’s not unusual after huge moves to trade sidewise,” Chuck Carlson, chief executive officer at Horizon Investment Services in the US, told Reuters. Investors “don’t want to sell and they don’t want to buy, so you have days like this.”
Australian index futures suggest a soft end to a choppy week defined by a near-4 per cent surge on Tuesday. That rally, the strongest in ten weeks, offset declines on Monday and yesterday. The S&P/ASX 200 would need to lose more than 90 points today to turn negative for the week.
Resource stocks weighed on the index during yesterday’s 0.9 per cent retreat. Overnight, BHP’s US-listed stock shed 1.25 per cent and its UK-listed stock 1.59 per cent. Rio Tinto gave up 2.31 per cent in the US and 1.76 per cent in the UK. The spot price for iron ore landed in China dipped 60 cents or 0.6 per cent to US$103 a dry ton.
Energy was the best of the US sectors, rising 1.2 per cent after the OPEC oil cartel announced a crackdown on member states failing to meet production caps. Brent crude settled 80 cents or 2 per cent at US$41.51 a barrel. Iraq and Kazakhstan submitted to demands to reduce production to compensate for previously exceeding their caps.
Gold caught a brief lift from weak US jobless claims, but was constrained by a rally in the dollar. Gold for August delivery settled $4.50 or 0.3 per cent lower at US$1,731.70 an ounce.
Copper was boosted by a pledge from China’s central bank to maintain liquidity over the second half of the year to support the economy. Benchmark copper on the London Metal Exchange climbed 0.7 per cent to US$5,783.50 a tonne. Aluminium gained 0.4 per cent, nickel 0.2 per cent, lead 0.7 per cent and zinc 1.8 per cent. Tin eased 0.8 per cent.
The dollar started the day at 68.5 US cents.