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A lacklustre week for Australian equities looks set for a downbeat conclusion following another mixed night on Wall Street and declines in oil and precious metals.
Futures action points to a flat start to local trade. The ASX SPI200 eased two points or 0.03 per cent.
The S&P/ASX 200 has moved in a different direction each session this week. A loss of seven points or 0.1 per cent yesterday left the index ten points above where it started on Monday.
Overnight, oil broke a nine-session winning run. Gold fell for the first time in five sessions. The dollar firmed above 77.5 US cents.
Wall Street
Energy stocks led a modest retreat as US stocks struggled for direction for a third night. The S&P 500 edged up six points or 0.16 per cent to its first rise in three nights. The Dow Jones Industrial Average slid seven points or 0.02 per cent. The Nasdaq Composite rose 53 points or 0.38 per cent as Big Tech outperformed.
“We pulled a lot of optimism forward, and the market is trying to figure out where we go from here,” Gregory Faranello, Head of US Rates at AmeriVet Securities, told CNBC. “The fiscal and monetary side of the equation seems priced into the market. Going forward, we need to see a broader economic recovery, a broader reopening and a broader dissemination of the vaccine.”
The energy sector slumped 1.6 per cent after the Organization of the Petroleum Exporting Countries cut its demand expectations. The cartel reduced its forecast by 100,000 barrels of oil per day, citing the impact of lockdowns and a downgraded economic outlook from the Organisation for Economic Co-operation and Development (OECD).
Brent crude settled 33 cents or 0.5 per cent lower at US$61.14 a barrel. The decline ended oil’s longest winning run since January 2019.
“Crude prices are taking a moment after the February breakout took prices above levels some analysts thought couldn’t be touched until a couple years down the road,” Edward Moya, senior market analyst at OANDA, told Reuters.
The market shrugged off a smaller-than-expected decline in benefits claims. First-time claims for unemployment benefits declined to 793,000 last week from 812,000 the previous week. Economists polled by Dow Jones had tipped a larger decline to 760,000.
“As long as the economic news is difficult the Fed is going to continue to act, which will prop up the stock market,” Sandy Villere, portfolio manager at Villere & Co, told Reuters.
Federal Reserve Chair Jerome Powell reassured investors on Wednesday the central bank will maintain rates at record lows for a long time to encourage jobs growth. Powell said monetary policy would remain “patiently accommodative”.
Australian outlook
The global rally in equities has temporarily run out of gas after a blistering start to the month. However, there is little evidence yet of significant selling. Both the ASX and Wall Street have gone sideways this week.
“Investors clearly think they’ve got plenty of time to get set, and there’s a bit of supply around here after the last rally,” ThinkMarkets analyst Carl Capolingua said. “Put it together and that means stagnation. We’re waiting for the next catalyst to swing sentiment. To be perfectly honest, I’m not sure what that’s going to be.”
The energy sector looks a potential headwind today, but downside is limited by the domestic sector’s reluctance earlier in the week to chase rising crude prices. The sector remains well below its January peak despite Brent’s nine-session bull run. Shopping centre operator Unibail-Rodamco-Westfield will be another drag here after plunging 13 per cent in European action.
Tech and health were the pick of the US sectors, rising 1.1 and almost 0.2 per cent, respectively. Bond proxies drifted lower as US bond yields improved. Financials dipped 0.2 per cent. Materials gained a little over 0.1 per cent.
The first big week of domestic earnings winds down a notch today before accelerating again next week. Potential highlights this session include Mirvac, Sims, Energy Resources, Jumbo Interactive and Baby Bunting.
The dollar climbed 0.39 per cent overnight to 77.54 US cents.
Commodities
Gold retreated from its highest level since the start of the month, ending a four-session win streak. Metal for April delivery settled $15.90 or 0.9 per cent lower at US$1,826.80 an ounce. The NYSE Arca Gold Bugs Index dropped 2.1 per cent. Silver slipped three cents or 0.1 per cent to US$27.047.
Copper eased from an eight-year high as Chinese markets closed for the week-long Lunar New year holiday. March copper dropped a fraction of a cent to US$3.7715 a pound.
With Chinese iron ore markets closed, BHP’s US-listed stock drifted 0.14 per cent lower and its UK-listed stock shed 0.09 per cent. Rio Tinto lost 0.96 per cent in the US and 0.17 per cent in the UK.
