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Australian shares were set to open higher despite modest declines during a “wait and see” session on Wall Street ahead of key risk events tonight.
ASX futures rose 14 points or 0.19 per cent, hinting at early relief from two days of decline. The S&P/ASX 200 fell 19 points or 0.26 per cent yesterday.
Overnight, US stocks retreated for a third session in choppy trade. US crude rose for a fourth night. Gold edged to its first gain in four sessions. Iron ore and copper declined.
Wall Street
The major indices swung between gains and losses before a late fade in the final half hour. The S&P 500 ended 11 points or 0.24 per cent lower. The Dow Jones Industrial Average shed 118 points or 0.34 per cent. The Nasdaq Composite gave up 20 points or 0.14 per cent.
Bank of America said markets were “mostly in wait-and-see mode” ahead of potential catalysts tonight, including the start of a new reporting season, September inflation data and minutes from the last Federal Reserve meeting.
Expectations for the third-quarter corporate earnings season have been clouded by concerns over the impact of persistent inflationary pressures as prices respond to pent-up demand and weak supply. The September Consumer Price Index tonight is expected to show prices for consumer goods increased by 0.3 per cent last month and were 5.3 per cent higher than the same month last year.
A report tonight from JPMorgan Chase marks the unofficial start of the new reporting season. Shares in the investment bank fell 0.77 per cent to a second straight loss. Other companies reporting this week also fell, including Citigroup, Wells Fargo and Bank of America.
“Given all of the difficulties that companies are having to deal with, there is more of a chance for more negative surprises this quarter than there were in the previous quarters,” Tom Martin, senior portfolio manager at Globalt Investments, told Reuters.
“We have had a good run here so you can get continued back and forth across the markets, a lot of it is going to be this push and pull between inflation expectations, and potentially the dampening of growth.”
The International Monetary Fund trimmed its 2021 growth forecast, citing the impact of the pandemic and supply chain issues. The Fund reduced its gross domestic product expectation to 5.9 per cent, down from 6 per cent in July.
“Inflation risks are skewed to the upside and could materialize if pandemic-induced supply-demand mismatches continue longer than expected,” the Fund warned. Central banks “should be prepared to act quickly if the recovery strengthens faster than expected or risks of rising inflation expectations become tangible”.
The Federal Open Market Committee tonight releases the minutes from its September meeting. Investors will parse the minutes for clues to whether the central bank will announce the long-awaited stimulus “taper” next month.
Australian outlook
A nothing session on Wall Street offers minimal direction for the day ahead. The market bias on Wall Street was mildly negative, but American investors were generally content to keep their powder dry until they get a better read on several of the major issues clouding the near-term outlook: corporate earnings, inflation and monetary policy.
The S&P/ASX 200 has fallen for two days, but declines have been modest compared to last month’s sharp retreat. The market has twice finished well above its session lows, suggesting buying interest has improved. The index hit an eight-session high yesterday before responding to weakening Asian markets and US equity futures.
A retreat in US rates prompted interest in bond proxies overnight. Real estate was the best of the sectors, rising 1.34 per cent. Utilities gained 0.66 per cent. Not all proxy sectors prospered: consumer staples were flat and healthcare declined 0.47 per cent.
Financials eased 0.31 per cent with the decline in yields. The materials sector nudged up 0.14 per cent. Energy was flat as traders wait to see if there is any more juice left in a rally that has lifted West Texas Intermediate crude to seven-year highs.
Commonwealth Bank, largest of the big four banks, holds a virtual AGM today. Southern Cross Media also holds its annual meeting.
Quarterly building activity figures and a monthly consumer sentiment report are slated for this morning.
IPOs: Equinox Resources lists today at 1 pm AEDT. The company is developing an iron ore project in the Pilbara.
The dollar firmed 0.07 per cent overnight to 73.53 US cents.
Commodities
Oil squeezed out a fourth rise in the US even as international prices eased after the IMF pared its global growth outlook. West Texas Intermediate crude settled 12 US cents or 0.2 per cent ahead at US$80.64 a barrel. Brent crude settled 23 US cents or 0.3 per cent lower at US$83.42 a barrel.
Iron ore pared two days of strong gains since the end of China’s Golden Week holiday. The spot price for ore landed in China declined US$8.45 or 6.2 per cent to US$128.50 a tonne after putting on US$19.15 since Friday.
BHP’s US-listed stock inched up 0.07 per cent after its UK-listed stock gave up 1.24 per cent. Rio Tinto dropped 0.74 per cent in the US and 1.88 per cent in the UK.
Gold logged its highest finish in almost a week amid defensive buying after the IMF suggested the outlook for global growth had softened since its last report in July. Gold for December delivery settled US$3.60 or 0.2 per cent higher at US$1,759.30 an ounce. The NYSE Arca Gold Bugs Index rallied 2.45 per cent.
Copper retreated after analysts at JPMorgan Chase released a bearish report predicting prices will fall below US$9,000 a tonne this quarter and fade next year.
“We maintain a bearish bias on prices and forecast an $8,900/t average in 4Q21 with prices moving back down towards an average of $8,200/t in 4Q22,” the note said.
Benchmark copper on the London Metal Exchange eased 0.9 per cent to US$9,520 a tonne. Aluminium added 0.2 per cent, zinc 1.1 per cent and tin 0.2 per cent. Nickel dropped 0.8 per cent and lead 1.2 per cent.
