The ASX was set to retreat from near 14-month highs after tech stocks steered Wall Street lower following Bitcoin’s dramatic weekend plunge.
ASX futures declined 32 points or 0.45 per cent as the Nasdaq fell almost 1 per cent. The Dow and S&P 500 backed off record levels.
US stocks hit reverse ahead of big week of corporate earnings. Reverberations from weekend volatility in cryptocurrency markets appeared to affect risk appetite, undercutting the likes of Tesla and Coinbase.
The Nasdaq Composite led the retreat with a fall of 138 points or 0.98 per cent. The S&P 500 shed 22 points or 0.53 per cent. The Dow Jones Industrial Average dropped 123 points or 0.36 per cent.
Bitcoin tumbled as much as 15 per cent over the weekend before paring its loss to 8.4 per cent. Other cryptocurrrencies also suffered heavy falls after running to record highs last week ahead of the Nasdaq listing of trading platform Coinbase.
“Whenever a headline grabbing asset sees a big decline at a time when the broad market stands at an expensive level, it usually has a negative impact on the stock market even if it’s only short-lived,” Matt Maley, chief market strategist at Miller Tabak, said.
Tesla was the biggest drag on both the Nasdaq and S&P 500. The electric carmaker, which has a significant holding in Bitcoin, sank 3.4 per cent. Selling was exacerbated by a weekend crash of one of the company’s vehicles that killed two people. Coinbase lost 2.63 per cent.
The CBOE Volatility Index or VIX climbed 6.4 per cent in a sign some investors were hedging against potential market weakness. The index fell last week to its lowest level in a year.
Coca-Cola climbed 0.6 per cent after beating analysts’ revenue and earnings expectations. IBM slipped 0.35 per cent in regular trade, then bounced 2.8 per cent in after-hours action after releasing earnings.
Intel, Netflix and Johnson & Johnson are among other big names due to report this week. Last week’s positive start has firmed up expectations this season’s Q1 earnings will come in 30.9 per cent stronger than the same period last year.
The tech heavyweights were mixed ahead of reporting next week. Apple, Netflix and Alphabet edged higher. Facebook and Amazon fell.
“The market has had a huge jump to the upside so it needs to take a little bit of rest,” Peter Cardillo, chief market economist at Spartan Capital Securities, told Reuters. “For now it’s just a little bit of profit taking as traders await results from big tech names on Wall Street.”
The market looks set for a breather today, but a fresh nine-and-a-half-year high in iron ore should cushion the downside. Copper also neared decade highs. The spot price for ore landed in China rose $3.35 or 1.9 per cent to US$181.20 a tonne yesterday as improving steel margins encouraged strong buying.
If China hoped tightening pollution controls at Tangshan would undermine ore prices, the ploy appears to have backfired. Margins have widened, encouraging other steelmakers to take up slack in the market.
The S&P/ASX 200 got within 1.4 per cent of a record yesterday before trimming its advance to a skinny two points or less than 0.1 per cent. The All Ords eked out a third straight record close. Both indices have come a long way over the last month and look ripe for a few sessions of consolidation. This has been a dip-buyer’s market for at least a year, so any weakness is likely to be short-lived.
US sector analysis offers few insights for the session ahead. Real estate was the only sector to advance, rising 0.29 per cent. Health and energy were next best with falls of less than 0.1 per cent. Consumer discretionary (Tesla) and tech took the biggest hits, falling 1.14 and 0.88 per cent, respectively.
The minutes from this month’s Reserve Bank policy meeting are scheduled for release at 11.30 am AEST.
The dollar climbed 0.59 per cent to 77.59 US cents.
Oil nudged higher following reports of shutdowns on Libyan oilfields due to government funding issues. Brent crude settled 28 cents or 0.4 per cent ahead at US$67.05 a barrel.
Gold retreated following its best week this year. Metal for June delivery settled $9.60 or 0.5 per cent lower at US$1,770.60 an ounce. The NYSE Arca Gold Bugs Index eased 0.8 per cent. Gold climbed 2 per cent last week, its best return since December.
“The short covering from last week is over for now and gold is seeking a new catalyst before moving in either direction,” Jeff Wright, chief investment officer at Wolfpack Capital, told MarketWatch. “It is also a big equities earnings week and this can lead to less interest in gold from retail traders more focused on equity markets.”
BHP‘s US-listed stock put on 0.5 per cent after its UK-listed stock shed 0.98 per cent. Rio Tinto gained 1.78 per cent in the US and 0.58 per cent in the UK.
US-traded copper climbed 1.7 per cent to US$4.24 a pound.