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Australian shares looked set to surrender 14-month highs despite a record close in the US on the busiest night of earnings season.
ASX futures declined 16 points or 0.23 per cent, signalling mild down-pressure on the last trading session of the month and the last day of the domestic quarterly reporting season.
The S&P/ASX 200 yesterday pre-empted a strong night on Wall Street, rising 18 points or 0.25 per cent to a pandemic-era high as US futures signalled gains ahead.
Wall Street
The S&P 500 climbed 28 points or 0.68 per cent to a new peak after tech giants Facebook and Apple reported earnings. Facebook soared 7.3 per cent to an all-time high. Apple faded to a loss of 0.07 per cent.
The Dow Jones Industrial Average rallied 234 points or 0.71 per cent. The Nasdaq Composite gained 32 points or 0.22 per cent.
While both tech giants beat Wall Street estimates, analysts said investors have become more cautious about inflated valuations with the major indices at or near record highs. While Facebook soared, news of a US$90 billion buyback and a 7 per cent dividend increase failed to lift Apple.
“Investors are really looking for significantly outsized results, and also outsized guidance as they look ahead to upcoming quarters,” Greg Bassuk, chief executive of AXS Investments, told Reuters. “We believe a lot of optimism has already been baked into the market, and we are cautioning investors to expect significant volatility.”
Amazon reported shortly after this morning’s close, sending its shares sharply higher in extended trade. Shares were lately up 3.42 per cent after the company increased Q1 profits by 44 per cent year over year to US$108.5 billion. The retail giant has been one of the biggest winners from the pandemic. Twitter – another winner – plunged almost 10 per cent on disappointing user numbers.
More than a tenth of the S&P 500 reported on the busiest night of this quarterly season. McDonald’s gained 1.2 per cent and Qualcomm 4.47 per cent. Caterpillar fell 2.08 per cent and Merck 4.42 per cent.
The economy accelerated over the first three months of the year. Gross domestic product increased at an annualised 6.4 per cent. Separately, the number of people filing for unemployment benefits for the first time dropped to 553,000 last week from 566,000 the week before.
Australian outlook
The ASX looked set for a soft start after scaling fresh pandemic heights yesterday. The local market front-ran a positive night on Wall Street as US futures rallied.
The market may get a chance to pull the same trick this session. Amazon, the last of the big six US market giants to report, surged in the last hour after reporting following the close of regular trade. A positive reaction from US futures could set up another positive session here. (Twitter has a much smaller market weighting.)
However, there are other factors at play. The end of the month often brings volatility as institutional managers realign portfolios with their trading mandates. Today is also the last day of the official quarterly reporting season and will bring the usual rush of last-minute reports, especially from the less-organised market minnows.
Facebook’s surge made Communication Services the pick of the US sectors, rising 2.75 per cent. Financials and energy were next best with gains of 1.82 and 1.11 per cent, respectively. Industrials put on o.7 per cent. Health and technology finished lower. While the US materials sector edged up 0.62 per cent, trade in BHP and Rio Tinto suggested both will be headwinds today (more below).
Today brings quarterly producer price data, another important indicator for inflation. Monthly private-sector credit figures are also due at 11.30 am AEST. Chinee manufacturing and services sector reports are due half an hour earlier. Albion Resources and Metal Tiger are scheduled to list today, according to ASX data.
The dollar retreated back below 78 US cents as the greenback strengthened. The Aussie dropped 0.46 per cent to 77.65 US cents.
Commodities
Copper cracked the US$10,000 level for the first time in a decade before trimming its advance. Benchmark copper on the London Metal Exchange rose as high as US$10,008. The metal finished 0.1 per cent ahead at US$9,889 a tonne, according to CommSec data.
“Only mining companies and hedge funds with long positions are enjoying this price. Everyone else in the market is suffering. Especially the end-users,” a copper rod maker in China told Reuters.
Aluminium gained 1.1 per cent and lead 0.8 per cent. Zinc closed flat. Nickel declined 1 per cent and tin lost 0.8 per cent.
BHP’s US-listed stock dropped 1.27 per cent and its UK-listed stock shed 0.36 per cent. Rio Tinto eased 0.05 per cent in the US and 0.18 per cent in the UK. The spot price for iron ore landed in China held steady at US$190.45 a tonne, just short of this week’s record high of US$193.85.
Oil rallied for a third night as positive US data outweighed the spread of Covid through India, the world’s third-largest crude importer. Brent crude settled $1.27 or 1.9 per cent ahead at US$68.05 a barrel.
Gold faded for a third session as strong US GDP data drove treasury yields higher. Metal for June delivery settled $5.60 or 0.3 per cent lower at US$1,768.30 an ounce. The NYSE Arca Gold Bugs Index declined 2.44 per cent.
