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The euphoria from yesterday’s 99-point share-market surge looked set to dim following late declines on Wall Street amid concerns about global growth.

ASX futures retreated 19 points or 0.26 per cent as the Dow and S&P 500 slipped into the red. The S&P/ASX 200 closed at an all-time high yesterday as M&A activity fuelled the index’s best session in six weeks.

Overnight, oil and copper fell on growth concerns. Iron ore rebounded from two-month lows. Gold rose.

Wall Street

US stocks gave up early gains as a slowdown in manufacturing sharpened concerns the pandemic-era rebound in economic growth may have peaked. A return of Covid-19 restrictions in parts of the US and China also weighed.

The S&P 500 faded to a loss of eight points or 0.18 per cent. The Dow Jones Industrial Average gave up 97 points or 0.28 per cent. The Nasdaq Composite clung on for a gain of eight points or 0.06 per cent.

Oil and bond yields declined after the Institute for Supply Management’s manufacturing PMI missed expectations for a second month. Appetite for bonds and oil are seen as an indicator of pessimism/optimism about the growth outlook. The ISM manufacturing index dropped to 59.5 last month from 60.6 in June. The reading was the weakest since January. Economists expected a rebound to 60.8.

Chinese data also indicated slowing growth. The official manufacturing PMI fell to 50.4 from 50.9 in June.

“A slowdown in the world’s second largest economy would be a big blow for the region at a time when numerous countries are struggling to get to grips with the latest COVID wave,” Craig Erlam, senior market analyst at Oanda,  said.

US bond yields fell back towards recent lows. Crude oil declined more than 3 per cent.

Also depressing risk appetite was signs the delta Covid-19 variant was spreading in both China and the US. China announced fresh restrictions yesterday as the virus spread to more than 20 cities and a dozen provinces. Millions of people have reportedly been confined to their homes.

In the US, some cities and companies have reintroduced mask mandates/advice as infection rates rise. CNBC said the US was averaging more than 63,000 new cases a day, the highest rate since April.

“COVID-19 cases have increased over 300% nationally from June 19 to July 23, 2021, along with parallel increases in hospitalizations and deaths driven by the highly transmissible B.1.617.2 (Delta) variant,” the US Centers for Disease Control and Prevention said in a Health Alert Network advisory.

Travel and tourism stocks came under pressure. The S&P 1500 airlines index fell 1.4 per cent. Cruise lines Royal Caribbean and Norwegian both shed around 1.8 per cent.   

Payments platform Square surged 10.16 per cent after announcing a US$29 billion all-stock deal to buy Australia’s Afterpay. The US firm also reported a 91 per cent increase in second-quarter gross profit overnight.

Australian outlook

The market looks set for a mild hangover following yesterday’s champagne session. The S&P/ASX 200 sprinted 99 points or 1.34 per cent yesterday as Square bought the nation’s largest domestically-listed tech company and Santos and Oil Search agreed terms to create a global energy giant.

The banks shone yesterday, mounting their strongest rally in more than a month and breaking out of their recent sideways/downwards trading range. They may struggle hold those gains if Australian yields follow Wall Street lower. US financials dipped 0.08 per cent overnight.

Materials was the biggest drag in the US, falling 1.17 per cent as traders sold stocks most exposed to any slowdown in the economic cycle. Industrials and energy both shed more than 0.7 per cent.

Bond proxies were among the few sectors to log gains. Utilities advanced 0.75 per cent and health 0.17 per cent.

The Reserve Bank meets this morning and will release its latest policy outlook at 2.30 pm AEST. The bank is widely expected to leave the cash rate on hold but reverse plans to wind back its bond-buying program. The deadening effect of the Greater Sydney lockdown means the growth outlook has dulled significantly since board members last met.

June building approvals are scheduled for release at 11.30 am.

The dollar rallied 0.35 per cent against a falling greenback to 73.67 US cents.

Commodities

Iron ore steadied near two-month lows after falling more than 10 per cent last week. The spot price for ore landed in China bounced US$2.90 or 1.6 per cent to US$183.40 a tonne.

The recovery came despite heavy falls in Chinese steel yesterday after Beijing revised its environmental stance. President Xi’s government is struggling to reduce pollution without damaging economic growth. Steel rebars reportedly fell more than 6 per cent during yesterday’s session.

Copper faded after data showed growth in Chinese factory activity was the slowest in 17 months during July. Benchmark copper on the London Metal Exchange eased 0.3 per cent to US$9,674.70 a tonne. Aluminium improved 0.6 per cent, lead 1 per cent, zinc 0.4 per cent and 0.4 tin per cent. Nickel declined 0.2 per cent.

BHP‘s US-listed stock dipped 0.19 per cent after its UK-listed stock gained 1.08 per cent. Rio Tinto put on 1.15 per cent in the US and 1.88 per cent in the UK.

Oil declined as weak US and Chinese manufacturing data signalled a potential slowdown in global growth. Brent crude settled US$2.52 or 3.3 per cent lower at US$72.89 a barrel.

Gold was boosted by a falling US dollar and declining bond yields. Metal for August delivery settled US$5 or 0.3 per cent ahead at US$1,822.20 an ounce. The NYSE Arca Gold Bugs Index dropped 0.78 per cent.

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