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The share market looked set to open little changed near a 13-month high after tech stocks lifted Wall Street to a fresh record.
SPI200 futures edged up two points or 0.03 per cent, signalling a potential pause in the S&P/ASX 200’s five-session winning streak. The benchmark index rallied 71 points or 1 per cent yesterday to its highest level since the early days of the pandemic.
Wall Street
US stocks glided higher as a retreat in bond yields lifted the rate-sensitive tech giants. The Nasdaq Composite rose 140 points or 1.03 per cent. Amazon, Alphabet, Apple, Microsoft and Netflix all advanced.
The S&P 500 climbed 17 points or 0.42 per cent to a second straight all-time high. The Dow Jones Industrial Average trailled with a rise of 57 points or 0.17 per cent.
Bond yields retreated as jobless benefit claims disappointed and Federal Reserve Chair Jerome Powell talked down the prospect of rising inflation forcing the central bank to raise rates. The yield on ten-year US treasuries declined almost four basis points. Yields that hit a 14-month high near 1.78 per cent in late March were this morning below 1.64 per cent.
Powell told a virtual event presented by the International Monetary Fund that any rise in inflation this year would be temporary and would not prompt an official rate rise or a cut in stimulus spending.
“The recovery remains uneven and incomplete,” he said. “In the most likely case, this period will show temporarily higher prices but not persistent inflation,” he added.
The Fed’s cautious outlook was underlined by a second straight week of higher-than-expected claims for unemployment benefits. The Labor Department said 744,000 Americans filed for benefits for the first time last week, ahead of the 694,000 predicted by economists. The four-week moving average of claims edged higher.
“The jump in jobless claims is disappointing but doesn’t change our view that the next few months will see huge job gains as the economy continues to reopen,” Jeff Buchbinder, equity strategist at LPL Financial, tod CNBC. “In fact, it wouldn’t shock us to see employment approach pre-pandemic levels by the end of this year.”
Falling yields help growth companies whose valuations depend on future earnings estimates. The Russell 1000 growth index – mainly tech stocks – rallied 1.05 per cent. The Russell 1000 value index – banks, energy stocks, etc – sank 0.05 per cent.
Trading volumes have declined this week ahead of a new quarterly reporting season. The three weakest trading days of the year have occurred this week, according to Reuters. Analysts expect S&P 500 earnings to increase 24.2 per cent in Q1 over the same period last year, according to Refinitiv data.
Australian outlook
The local market’s five-session winning run faces its first test today, albeit a mild one. US action overnight raised no major concerns. Tech was the standout US sector, rising 1.4 per cent, but there were also smaller gains for materials and industrials. The financial sector finished flat. Energy and real estate were the biggest drags.
The ASX has built considerable momentum this week – enough to carry the All Ords to within 0.4 per cent of its old peak. However, the major indices are likely short-term overbought and may need to consolidate for a few sessions. Potential delays in the rollout of vaccines could give traders an excuse to take some money off the table. An overnight jump in the dollar hands US traders a currency windfall. Old resistance around 6900/6920 should now act as support.
The Reserve Bank releases its six-monthly Financial Stability Review at 11.30 am AEST. A gauge of services sector activity is due at 8.30 am. China releases inflation data at 11.30 am.
The dollar climbed 0.55 per cent overnight to 76.52 US cents as the Fed’s Powell effectively talked down the greenback.
Commodities
BHP and Rio Tinto inched higher in overseas trade despite a mild retreat in iron ore. The spot price for ore landed in China dipped 75 cents or 0.4 per cent to US$172.15 a tonne. BHP’s US-listed stock gained 0.11 per cent and its UK-listed stock 0.28 per cent. Rio Tinto added 0.22 per cent in the US and 0.21 per cent in the UK.
A falling US dollar helped lift gold to its highest level in around six weeks. Gold for June delivery settled $16.60 or almost 1 per cent ahead at US$1,758.20 an ounce. The NYSE Arca Gold Bugs Index advanced 2.4 per cent.
Copper shrugged off concerns about rising warehouse inventories. Benchmark copper on the London Metal Exchange climbed 1.1 per cent to US$9,018.25 a tonne. Aluminium and nickel gained 1.2 per cent. Zinc added 0.8 per cent. Lead shed 0.6 per cent and tin 0.9 per cent.
Oil finished barely changed as traders awaited fresh catalysts. Brent crude settled four cents or 0.1 per cent ahead at US$63.20 a barrel. The US benchmark eased 17 cents or 0.3 per cent to US$59.60.
