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A late reversal on Wall Street points to further pressure on Australian stocks after US President Joe Biden nominated Jerome Powell to lead the Federal Reserve for a second term.

ASX futures wilted 12 points or 0.16 per cent as a US rally collapsed in the final half-hour of trade.

The S&P 500 and Nasdaq Composite finished in the red after earlier hitting intraday records. The Dow rose for only the second time in six sessions.

Gold suffered its biggest hit in three months as the greenback and US treasury yields surged. The Australian dollar slumped to an eight-week low. BHP and Rio Tinto rallied with iron ore in overseas trade.

Wall Street

US stocks finished mixed at sessions lows after the White House opted for continuity at the nation’s central bank. President Joe Biden nominated sitting Chair Powell to lead the Fed. The other candidate for the role – Fed Governor Lael Brainard – will be Powell’s deputy as Vice Chair. Congressional Republicans were expected to support Powell’s nomination.

The S&P 500 fell away in late trade to a loss of 15 points or 0.32 per cent. The Dow Jones Industrial Average slashed an advance of more than 300 points to just 17 points or 0.05 per cent. The Nasdaq Composite hit an all-time high before fading to a loss of 203 points or 1.26 per cent.

Powell has steered the Fed through one of its most challenging periods, slashing interest rates close to zero and introducing emergency asset buying to cushion the market from the pandemic global economic freeze. Wall Street was more wary of Brainard, who was supported by progressive Democrats for her stance on bank regulation.    

“Markets like predictability,” Randy Frederick, managing director of trading and derivatives at Charles Schwab, told Reuters. “While Brainard may have been a fine choice, the markets would not know what to expect from her.”

The financial sector surged more than 1.4 per cent following the nominations. The US dollar and bond yields also rose strongly.

“There were some concerns that Brainard would push harder to tighten banking regulation,” Greg Daco, chief US economist at Oxford Economics, told CNBC.

Goldman Sachs gained 2.26 per cent, JPMorgan Chase 2.13 per cent and Morgan Stanley 2.48 per cent.

In other moves, Moderna rose 7.17 per cent after the US regulator approved the company’s booster for adult Americans. Tesla bounced 1.74 per cent after CEO Elon Musk tweeted a new model would “probably” be available in China in March.

Australian outlook

A final-hour reversal in the US flipped the outlook for this session on its head. The applause for Powell’s renomination lasted no more than a few hours. US stocks sold off heavily in the final minutes.

The late plunge will compound fragile market sentiment here following yesterday’s slide. The S&P/ASX 200 has 43 points to make back just to reach break-even for the week.

A weaker dollar should support exporters. The Aussie fell to its weakest level since early October. The Aussie was last down 0.12 per cent at 72.21 US cents.

The major miners should lead, with support from energy and financials. The US energy sector jumped 1.81 per cent as crude caught an uplift from reports the OPEC+ oil cartel may reduce production if the US and other countries release supplies from strategic reserves (more below).  

Financials gained 1.43 per cent, industrials 0.28 per cent and materials 0.15 per cent. Tech and bond proxies ended lower.

Preliminary November manufacturing and services-sector data are due at 9 am AEDT.

Annual general meetings today include Pro Medicus, Link Administration, Monadelphous, Mayne Pharma, Brickworks and APN Industria.

IPOs: a strong tip for the punters today. RAS Technology Holdings lists at 11 am AEDT. RAS stands for Racing And Sports. The Canberra-based company services the racing and betting industry.   

Commodities

Oil rebounded following a Bloomberg report the Organization of the Petroleum Exporting Countries may reduce planned production increases if a coalition of governments proceed with a coordinated release of national reserves. US President Joe Biden was set to announce the release of strategic reserves tonight. OPEC delegates said the cartel would likely amend plans to increase production by 400,000 barrels next month if the release went ahead.

Brent crude settled 81 US cents or 1 per cent higher at US$79.70 a barrel. The US benchmark climbed 81 cents or 1.1 per cent to US$76.75.

Iron ore moved firmly higher for a second session amid signs of a pick-up in steel demand. Mysteel data showed demand for steel products improved 4.2 per cent last week. The spot price for ore landed in China firmed US$3.40 or 3.7 per cent to US$94.70 a tonne.

BHP‘s US-listed stock jumped 3.17 per cent after its UK-listed stock put on 3.11 per cent. Rio Tinto gained 2.14 per cent in the US and 1.9 per cent in the UK.

Gold endured its biggest tumble in three and a half months as any risk premium from Fed leadership uncertainty evaporated and as yields and the greenback rallied. Metal for December delivery settled US$45.30 or 2.4 per cent lower at US$1,806.30 an ounce. The NYSE Arca Gold Bugs Index shed 1.66 per cent.

“Gold is getting punished as stocks hit fresh record highs and the dollar soars after President Biden selected Jerome Powell for a second term as Fed Chair,” Edward Moya, senior market analyst at Oanda, said.

Dollar pressure on commodities added to copper‘s struggles. December copper slid 0.2 per cent to US$4.3965 a pound on Comex. Industrial metal prices have retreated in recent months as debt issues in China’s property market undermined demand.

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