The share market looks set to open near a two-week low following a downbeat end to a losing week on Wall Street and a breakout in the dollar.
ASX futures eased 11 points or 0.16 per cent, signalling a soft start to the last week of the interim reporting season.
The week ahead brings trading updates from household names such as Woolworths, Nine Entertainment, Qantas and Afterpay (more below).
On Friday, US stocks closed mixed. Oil and iron ore declined. Copper hit a nine-year peak. Gold inched higher. The dollar flew to its strongest level in almost three years.
A week of gentle down-pressure in the US finished with another lacklustre session. The S&P 500 finished near its low with a loss of seven points or 0.19 per cent. The Dow Jones Industrial Average closed dead flat. The Nasdaq Composite added nine points or 0.07 per cent.
For the week, the S&P 500 lost 0.71 per cent. The Nasdaq gave up 1.57 per cent. The Dow eked out a gain of 0.11 per cent.
Buying interest has dimmed since the start of the month as investors worried the steady creep of treasury yields presages a rotation from equities to the relative calm of government bonds. On Friday, the US ten-year yield climbed five basis points to 1.34 per cent, its highest in almost a year.
“I think that this week may have put a little bit of inflation fear into people,” JJ Kinahan, chief market strategist at TD Ameritrade, told CNBC.
Treasury Secretary Janet Yellen downplayed inflationary risks, saying the toll of pandemic should be a greater concern. The former Fed Chair called for support for President Joe Biden's US$1.9 trillion stimulus package.
“Inflation has been very low for over a decade, and you know it’s a risk, but it’s a risk that the Federal Reserve and others have tools to address,” she said. “The greater risk is of scarring the people - having this pandemic take a permanent lifelong toll on their lives and livelihoods.”
Traders continued to rotate out of growth stocks that outperformed during the pandemic back to cyclicals that have most potential upside as the economy recovers. The Russell 1000 Value Index climbed 0.56 per cent. The Russell 1000 Growth Index eased 0.57 per cent.
“When the economy is roaring, [cyclicals are] roaring. When the economy is weakening, they’re weakening,” Tim Ghriskey, chief investment strategist at Inverness Counsel, told Reuters. “The economy will roar, at least for a period of time. There’s huge pent-up demand, whether just for travel or going back to work.”
Small caps outpaced the broader market. The Russell 2000 added 2.18 per cent.
The S&P/ASX 200 enters a new week on the back of two losing weeks for the first time since October. Losses have been minimal, but speak to the market's loss of momentum since a bullish start of the month. On Friday, the index slumped 92 points or 1.34 per cent.
Bulls looking for positive signals for the week ahead will point to the start of the national vaccination programme yesterday. The programme will roll out across the country in the weeks ahead, an important bridge to a possible end to lockdowns and other Covid restrictions.
Cyclicals shone in the US on Friday. Materials gained 1.8 per cent, energy 1.6 per cent and industrials 1.6 per cent. Financials added 1.2 per cent. Rate-sensitive utilities, consumer staples and health lost at least 1.1 per cent.
Almost a hundred companies will report earnings this week. Among those kicking things off today are Ampol, Helloworld, Costa Group, Bluescope Steel, Mesoblast, APA Group, Western Areas and Lendlease. Tomorrow brings Seek, G8 Education, Oil Search, Adbri, Spark Infrastructure, Vocus, Alumina, Monadelphous, Worley, Estia Health, Perseus and Sydney Airport.
Reporting Wednesday: Woolworths, Nine Entertainment, Medibank, Blackmores, Bega Cheese, Air New Zealand, Mayne Pharma, Ramsay Healthcare, Scentre Group, Perenti Global, Healius, Appen, WiseTech, InvoCare and IOOF. Thursday: Afterpay, Qantas, A2M Milk, Flight Centre, Southern Cross Media, Qube, Stockland, Ardent Leisure, Iluka, Sandfire, Galaxy, Z1P Co and Lynas. Friday: Kogan, Northern Star, BWX and Waypoint REIT (Sources: CommSec, TradingView).
Wednesday brings quarterly reports on wages growth and construction, both important inputs to next month's GDP figure.
Currency concerns may re-emerge after the dollar smashed through overhead resistance to a level last seen in March 2018. The Aussie hit 78.78 US cents on Friday and was this morning ahead 0.01 per cent at 78.68 US cents. The Reserve Bank's bond-buying programme was at least in part intended to depress the dollar, but the central bank seems to be fighting a losing battle against commodity prices.
Optimism over improving global demand for construction materials lifted copper to its highest since September 2011. Benchmark copper on the London Metal Exchange surged 4.4 per cent to US$8,946.75 a tonne. Nickel gained 2.4 per cent, lead 2.3 per cent, zinc 1 per cent and tin 5.8 per cent. Aluminium dropped 0.3 per cent.
“The return of the Chinese market post the Lunar New Year has seen some renewed interest in base metals,” Gianclaudio Torlizzi, partner at Italian consultancy T-Commodity, told Reuters. “The very short term for copper is bullish, but we are in the latest phase of a rally and we would look to short the area closer to $9,000.”
BHP and Rio Tinto shrugged off a soft end to last week in Australian trade. BHP's US-listed stock added 0.41 per cent and its UK-listed stock 1.9 per cent. Rio Tinto put on 2.16 per cent in the US and 1.88 per cent in the UK. The spot price for iron ore landed in China retreated $2.25 or 1.3 per cent to US$172.20 a tonne.
Gold trimmed its worst week since early January. Metal for April delivery settled $2.40 or 0.1 per cent ahead at US$1,777.40 an ounce. The NYSE Arca Gold Bugs Index eased 0.86 per cent.
Oil retreated as a bitterly cold snap eased its grip on the US. Brent crude settled $1.02 or 1.6 per cent lower at US$62.91 a barrel.