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A late reversal on Wall Street points to mild early pressure on Australian stocks as the tremors from Wall Street’s January rates tantrum continue to subside.
ASX futures eased 11 points or 0.16 per cent after the S&P 500 and Nasdaq Composite fell for only the second time in seven sessions. The Dow closed flat.
BHP and Rio Tinto rose sharply in overseas trade as iron ore neared US$150 a tonne. Gold recorded its biggest rise in nearly three weeks. Nickel, copper and aluminium advanced. Crude oil retreated. The dollar firmed above 71 US cents.
Wall Street
US stocks finished mixed as investors weighed corporate earnings, rising yields and Friday’s jobs surprise. The Nasdaq and S&P 500 were kept in check by further weakness in Facebook owner Meta Platforms.
The Dow Jones Industrial Average led with a rise of one point or less than 0.01 per cent. The S&P 500 faded in the final half hour to a loss of 17 points or 0.37 per cent. The Nasdaq Composite shed 82 points or 0.58 per cent.
A session without major economic data or earnings announcements saw the main indices see-saw between gains and losses before a decisive final-hour decline. Volatility continued to abate after last month’s market nerves over the prospect of higher rates.
The week ahead is expected to be calmer, at least until Thursday’s consumer price index report. Unexpectedly strong January employment figures released on Friday underlined the strength of the US economic recovery.
“Right now, this market is just focused on one thing: inflation,” Ed Moya, senior market analyst at OANDA, told MarketWatch. “It’s a long time until Thursday’s inflation report. Nothing is going to move us in a major way in either direction until we get to later this week, and the market should be rather calm.”
Meta Platforms was the biggest drag on the Nasdaq and S&P 500. The social media giant’s shares fell 5.14 per cent after the company threatened to pull Facebook and Instagram from Europe over a dispute about data transfer. European lawmakers have objected to the transfer of user data to the US.
In earnings news, Amazon climbed another 0.19 per cent following last week’s well-received quarterly. Tyson Foods jumped 12.24 per cent. Hasbro dropped 0.98 per cent. Peloton surged 20.93 per cent on reported takeover interest.
Despite some high-profile misses, this quarterly earnings season has seen 77 per cent of S&P 500 companies beat earnings estimates, according to FactSet. Seventy-six companies were due to report this week, including Disney and Coca-Cola.
Markets are still in recovery mode following a plunge last month that dragged the S&P 500 and Nasdaq Composite into correction territory. Conditions improved last week as the major indices logged their best weeks since December.
“It has been a raging bear market for high multiple stocks and for anything speculative in nature. It’s just been taken out to the woodshed. So there’s probably some value being created there now,” Morgan Stanley’s Mike Wilson told CNBC.
Australian outlook
A lot of the heat has gone out of the market since the S&P/ASX 200 bottomed out on January 27. Trading volumes have fallen back to more normal levels. Volatility gauges on both sides of the Pacific have subsided.
Dip-buyers were punished last month, but had a big win yesterday. The ASX 200 finished just nine points in the red after earlier tumbling 74 points. For buy-and-hold investors, these are all positive signs.
Energy stocks and utilities have been the best performers over the last week, both gaining more than 4 per cent. The utilities sector hit a 16-month high yesterday. Energy touched its strongest level since mid-October.
“Energy and utilities sectors continued to outperform the broader market last week, rising 4.9% and 4.5% respectively compared to the ASX 200’s 1.9% gain,” City Index senior market analyst Matt Simpson said.
US action suggests the energy sector could go on with it today, despite a dip in crude overnight (more below). The US energy sector was the night’s best performer, gaining 1.3 per cent. Gold and iron ore miners were also strong (more below).
US financials added 0.33 per cent, consumer staples 0.1 per cent and industrials 0.07 per cent. The utilities sector dipped 0.2 per cent and materials 0.43 per cent.
Back home, NAB’s business confidence survey for January is due at 11.30 am AEDT.
Today’s interim corporate earnings include updates from Suncorp and Shopping Centres Australia Property Group. Macquarie Group is due to release a trading update.
IPOs: WA1 Resources lists at 12 pm AEDT. This minerals explorer holds three projects in WA, including the West Arunta Project 400km south of Halls Creek.
The dollar climbed 0.62 per cent to 71.24 US cents.
Commodities
Iron ore climbed towards US$150 a tonne after China’s state planner called for more investment in infrastructure. The National Development and Reform Commission said authorities should implement 102 major projects scheduled under the 14th five-year plan.
Shanghai steel prices improved 1.7 per cent. The spot price for ore landed in China rose US$2.80 or 1.9 per cent to US$149.40 a tonne.
Industrial metals also responded to the prospect of increased demand. Benchmark copper on the London Metal Exchange edged up 0.09 per cent to US$9,850 a tonne. Aluminium gained 1.48 per cent, nickel 2.09 per cent, lead 0.69 per cent and zinc 0.69 per cent. Tin retreated 0.36 per cent.
BHP and Rio Tinto ripped higher in overseas trade. BHP‘s US-traded depositary receipts jumped 3.48 per cent. Its UK listing gained 4.17 per cent. Rio Tinto added 3.72 per cent in the US and 2.78 per cent in the UK.
Gold logged its strongest advance since January 19 amid hedging ahead of Thursday’s US inflation report. Metal for April delivery settled US$14 or 0.8 per cent ahead at US$1,821.80 an ounce. The NYSE Arca Gold Bugs Index jumped 3.52 per cent.
Oil fell back from seven-year highs following seven straight weeks of gains. Brent crude settled 58 US cents or 0.6 per cent lower at US$92.69 a barrel.
The setback came amid signs of progress in negotiations over Iran’s nuclear ambitions. The White House reportedly lifted some sanctions as a sop to bring Iran back to the table. Any breakthrough in negotiations could bring Iranian crude onto the market.
