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Aussie shares look set to open higher after preempting a rough night on Wall Street.

The S&P/ASX 200 slumped 73 points or 1.2 per cent yesterday as US index futures plunged, but looks likely to recoup some of those losses at today’s open. SPI200 index futures bounced 17 points or 0.3 per cent this morning after US stocks finished off their session lows.

Miners and oil companies resisted a tech-led US retreat as oil and copper advanced. Gold and iron ore declined.

Wall Street

Australian traders battened down for US losses yesterday and were not proven wrong by the night’s events. US shares sold off after the Federal Reserve committed to low rates for years to come, sharpening fears about the pace of the post-pandemic recovery as unemployment remains stubbornly high. Some commentators accused Chair Jerome Powell of rattling the market by emphasising the challenges to the economy.

“Investors love when the Fed lowers rates, because they feel that’s good for market,” Jake Dollarhide, chief executive officer of Longbow Asset Management in the US, told Retuers. “But if the Fed says we need to keep rates low for longer, then people start worrying about the economy itself.”

The S&P 500 finished 28 points or 0.84 per cent in the red despite paring its fall in late action. The Nasdaq Composite dropped 140 points or 1.27 per cent as Big Tech came back under the pump. Apple, Microsoft, Facebook, Amazon, Alphabet and Netflix all closed lower.

The Dow was once again the pick of the three major gauges with a loss of 130 points or 0.47 per cent as gains in Dow Inc and Caterpillar helped offset declines in tech and financials.

First-time claims for unemployment benefits came in marginally stronger than expected, but remained elevated. Initial claims last week dropped to 860,000 from 893,000, but the underlying downtrend has slowed this month as companies continue to slash jobs, denting hopes of a V-shaped recovery.

Australian outlook

Wednesday’s big rally has handed the ASX a chance of breaking a four-week losing run. The ASX 200 needs to fall less than 24 points this session to avoid extending a gentle, grinding downtrend that has developed since mid-August.

US action indicates technology and financials are going to be headwinds today, which means the big miners and industrials will likely need to fire. To do that, our exporters will have to defy a creeping dollar. The Aussie edged up 0.24 per cent to 73.14 US cents as the greenback declined.

BHP and Rio Tinto fell in overseas action, but pared their losses as the 24-hour trading cycle wore on. BHP’s US-listed stock gave up 0.7 per cent after its UK-listed stock shed 2.22 per cent. Rio Tinto lost 0.19 per cent in the US and 1.19 per cent in the UK.

The US financial sector slumped 1 per cent after the Fed signalled rates will stay at record lows until at least 2023. The post-pandemic meltdown rebound in Australian lenders has stalled for similar reasons. The local financial sector this week faded to its weakest level since May ahead of cuts near the end of this month to government handouts that have helped cushion the economy from an anticipated wave of bad debts.

Commodities

The US energy sector inched up 0.2 per cent as oil was boosted by a renewed commitment to production caps from the Organization of the Petroleum Exporting Countries and allies (OPEC+). Brent crude settled $1.08 or 0.2 per cent ahead at US$43.30 a barrel. The International Energy Agency reported a 97 per cent compliance rate with supply targets among members of the cartel.

“This implies that Saudi Arabia’s effort to crack down on countries that had previously been exceeding their production targets, including Iraq and Nigeria, has worked,” Cailin Birch, global economist at The Economist Intelligence Unit, told MarketWatch. “Both countries cut their output more deeply in August to compensate for earlier excesses.”

Iron ore continued to retreat from the US$130 level. The spot price for ore landed in China eased $2.25 or 1.8 per cent to US$122.05 a tonne.

American gold miners declined as gold sank more than 1 per cent. Gold for December delivery settled $20.60 or almost 1.1 per cent lower at US$1,949.60 an ounce. The NYSE Arca Gold Bugs Index shed 1.67 per cent.

Copper inched closer to this month’s two-year high. Benchmark copper on the London Metal Exchange rose 0.2 per cent to US$6,806.25 a tonne, just shy of the US$6,830 mark on September 1. Lead gained 0.9 per cent. Aluminium lost 0.8 per cent, nickel 0.9 per cent, zinc 0.4 per cent and tin 0.5 per cent.

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