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The share market will try to put last week’s omicron jitters behind it despite declines on Wall Street as investors assessed mixed US jobs data.  

Futures trading this morning pointed to tentative gains to start the week. SPI 200 futures edged up 11 points or 0.15 per cent. The S&P/ASX 200 declined 0.5 per cent last week to a fourth straight weekly loss as equity traders weighed the economic threat from the new omicron Covid variant.

Wall Street

US stocks slumped as employment growth missed expectations, but the jobless rate dropped and wages grew. Analysts said the report was not weak enough to delay the Federal Reserve’s withdrawal of support for the economy or prevent rates rising next year.

A late up-tick trimmed the S&P 500‘s loss to 39 points or 0.84 per cent. The Dow Jones Industrial Average finished 60 points or 0.17 per cent lower after earlier falling more than 300 points. The Nasdaq Composite shed 296 points or 1.92 per cent as investors dumped tech companies with stretched valuations.

The US economy added an anaemic 210,000 jobs last month, less than half the 573,000 anticipated by economists. But the unemployment rate dropped to a 21-month low of 4.2 per cent from 4.6 per cent and jobs growth in previous months was revised upwards. An increase in hours worked was reflected in higher aggregate wages.

“Don’t be fooled by the measly payroll jobs gain this month because the economy’s engines are actually in overdrive as shown by the plunge in joblessness,” Christopher Rupkey, chief economist at FWDBONDS, told Reuters.

A separate gauge of services-sector activity hit a record. The Institute of Supply Management’s non-manufacturing activity index rose from 66.7 in October to 69.1 last month. The November reading was the strongest since the measure was introduced in 1997.

Fed Chair Jerome Powell last week told a Senate committee the central bank should accelerate the wind-up of its stimulatory asset-buying program. Powell dropped any reference to current inflationary pressures as “transitory”. The board meets next week.

“The Fed will see the [November jobs] report as more than adequate to stay on course to accelerate tapering of asset purchases at the December meeting, implying an end to purchases in March,” Andrew Hollenhorst, chief US economist at Citigroup, told Reuters. “Moreover, an unemployment rate that is poised to fall below 4.0% perhaps in the coming months keeps a first Fed rate hike in June or even earlier firmly on the table.”

The VIX or volatility index climbed to its highest since January before paring its gain. Defensive sectors rallied. Banks slid with treasury yields.

Big Tech sold off after veteran value investor Charlie Munger told an Australian conference parts of the market were wildly overvalued. Tesla skidded 6.42 per cent, Nvidia 4.46 per cent, Microsoft 1.97 per cent and Apple 1.17 per cent.

The major indices ended lower for a week defined by wild swings as markets adjusted to a new Covid variant. For the week, the S&P 500 shed 1.2 per cent, the Dow 0.9 per cent and the Nasdaq 2.6 per cent.

Australian outlook

Futures trading suggested cautious optimism the domestic market will settle this week after a run of volatile sessions. The SPI took Friday’s US falls in its stride.

The ASX 200 tested two-month lows several times last week, but finished just 0.5 per cent lower for the week. Trading volumes returned to normal after peaking on the third day of the omicron sell-off.

Defensive sectors appeared the best prospects following declines in US financials and miners. BHP and Rio Tinto suffered heavy falls on Friday as copper and other industrial metals declined and the Australian dollar slumped below 70 US cents. BHP‘s US-listed stock shed 5.46 per cent. Its UK-listed stock gave up 2.74 per cent. Rio Tinto dropped 4.37 per cent in the US and 3.02 per cent in the UK.

A bruising session for the dollar saw the local unit test 13-month lows. The Aussie fell as low as 69.92 on Friday and was this morning trading at 70.06 US cents.

The heavyweight banks loom as another potential headwind. The US financial sector skidded 1.54 per cent as the yield on ten-year US treasuries fell to its lowest since late September. The heat has also come out of Australian rates, helping to pull the financial sector to a seven-month low last week.

Elsewhere in the US, tech sank 1.65 per cent, energy 0.75 per cent and materials 0.23 per cent. Bond proxies attracted a bid. Consumer staples jumped 1.4 per cent, utilities 1.02 per cent and health 0.25 per cent.

The Reserve Bank meets tomorrow under pressure to adjust its outlook to greater reflect inflationary pressures. The US Federal Reserve blinked last week, acknowledging for the first time that this period of elevated price rises may not be “transitory”. The Fed now appears likely to raise rates as soon as mid-2022 to stop the US economy overheating.

At its last meeting, the RBA scrapped its bond yield target and dropped a reference to 2024 as the earliest likely raise. However, the emergence of the omicron variant may have given it a convenient excuse to sit pat during the last meeting of the year.

November job advertising figures are due at 11.30 am AEDT. Tomorrow brings weekly consumer confidence data, services-sector activity and house prices. RBA Governor Philip Lowe is due to deliver a speech at a virtual summit on Thursday.

AGMs: this week’s line-up includes Afterpay (today); Bank of Queensland (Tuesday); Fonterra Shareholders’ Fund (Thursday); and Pendal Group and Washington H. Soul Pattinson (Friday).

IGA operator Metcash releases half-year earnings today. 

The market for initial public offerings has started to show possible signs of exhaustion. Several listings traded well below launch prices last week. Notable flops included Biome (listed 20 cents, trading at 11 cents) and Radiopharm Theranostics (listed 60c, trading 34.5c). 

This week’s slate is lighter, but starts with a triple header. Australian Bond Exchange Holdings lists today at 10.30 am AEDT. ABE describes itself as Australia’s pre-eminent marketplace for investing in fixed income securities. Newmark Property REIT at 12 pm combines two unlisted property trusts: the Newmark Hardware Trust and Newmark Capital Property Trust. Larvotto Resources at 12.30 pm is a copper-gold explorer with projects in Queensland, WA and New Zealand.

The rest of the week looks like this: American West Metals, RocketBoots (Tuesday); The Hydration Pharmaceuticals Company, SE Advanced Materials (Thursday); and Panther Metals (Friday).

Commodities

Iron ore inched higher, even as Mysteel data showed Chinese steel production continued to decline. Utilisation rates at blast furnaces surveyed by the consultancy dropped for a seventh week. The spot price for ore landed in China edged up 15 US cents or 0.2 per cent to US$98.50 a tonne.

Oil trimmed a sixth straight losing week. Brent crude settled 21 US cents or 0.3 per cent higher for the session at US$69.88 a barrel. For the week, the international benchmark shed around 2.4 per cent.

Gold rallied off two-month lows. Metal for February delivery settled US$21.20 or 1.2 per cent higher at US$1,783.90 an ounce. The NYSE Arca Gold Bugs Index gained 0.84 per cent.

Copper declined as the greenback firmed and investors continued to factor in a potential demand hit from omicron. Benchmark copper on the London Metal Exchange fell 1.1 per cent to US$9,486 a tonne. US-traded copper slid 0.7 per cent to US$4.267 a pound.

On the LME, aluminium gained 0.9 per cent, nickel 0.5 per cent, zinc 0.3 per cent and tin 0.7 per cent. Lead gave up 2.2 per cent.

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