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Futures action pointed to a soft start to the Australian trading week despite a broadly positive session on Wall Street supported by earnings surprises and strong jobs data.
ASX futures declined 41 points or 0.58 per cent, suggesting early pressure after last week’s recovery. The S&P/ASX 200 rallied 132 points or almost 1.9 per cent to its first weekly advance in four weeks.
Wall Street
US stocks capped a second straight winning week with a Big Tech-led rally following well-received earnings from Amazon, Snap and Pinterest. Lenders were boosted by a jump in long-term rates following a strong January jobs report.
The S&P 500 climbed 23 points or 0.52 per cent. The Nasdaq Composite gained 219 points or 1.58 per cent. A late dip pushed the Dow Jones Industrial Average down 21 points or 0.06 per cent.
Sharp post-earnings advances in Amazon, Snap and Pinterest helped settle nerves following Thursday’s collapse in the price of Facebook owner Meta Platforms. Amazon rallied 13.54 per cent, Snap 58.82 per cent and Pinterest 11.18 per cent. Meta Platforms eased 0.28 per cent a day after losing 26.39 per cent or US$237 billion – the largest single-session loss in Wall Street history.
“These are eye-watering, stomach churning moves normally associated with penny stocks, and yet they are happening in companies with billion-dollar market caps,” Michael Hewson, chief market analyst at CMC Markets UK, said.
Despite the volatility, the major indices booked a second week of advances. The S&P 500 rose 1.6 per cent, its best return of the year so far. The Nasdaq added 2.4 per cent and the Dow 1 per cent.
Worries about a soft January employment report proved unfounded as the economy added more than three times the number of jobs that economists expected. Non-farm payrolls increased by 467,000 jobs. Economists polled by Reuters had predicted a gain of around 150,000. Previous tallies for November and December were also revised substantially higher.
“This is a strong jobs report,” Chris Low, chief economist at FHN Financial, told Reuters. “The odds of quelling inflation without a recession look better today than yesterday.”
The financial sector jumped 1.66 per cent as bonds sold off, sending lending rates sharply higher. The yield on ten-year US treasuries surged to its highest since late 2019.
“For markets, the jobs report is all about the Fed, and today’s upside surprises… keep the Fed on track to begin raising rates in March and hike four or more times this year,” Barry Gilbert, asset allocation strategist at LPL Financial, told CNBC.
Australian outlook
Futures traders anticipate a weak start to the session following pressure on the dollar and US miners on Friday. The dollar sank back under 71 US cents on Friday as US jobs data lifted the greenback. The Aussie rebounded 0.46 per cent this morning to 70.71 US cents.
Basic materials was the worst-performing sector in the US on Friday, falling 1.72 per cent. A rising US dollar is broadly negative for mining stocks because it raises the cost of dollar-denominated commodities for buyers using other currencies.
While the Australian market tends to be viewed overseas as a proxy for demand for raw materials, the financial sector also has a substantial weighting. US financials rallied 1.66 per cent with improved lending rates.
Also strong in the US were consumer discretionary (Amazon) +3.74 per cent, energy +1.58 per cent and technology +0.47 per cent. Defensive sectors that attract investment flows when yield returns are poor mostly declined: real estate fell 1.26 per cent, consumer staples 1.2 per cent and utilities 0.8 per cent.
The S&P/ASX 200 rallied 42 points or 0.59 per cent on Friday. A burst of buying in the closing auction suggested some institutional traders see value at these levels following recent weakness. The index more than doubled its gains in the auction, a time when professional buyers often pounce.
Earnings season picks up this week. Among bigger names scheduled to report are: Argo Investments (today); Suncorp, Shopping Centres Australasia Property Group (Tuesday); CBA, BWP Trust, Bailador Technology Investments (Wednesday); AMP, ASX, AGL Energy, CIMIC, Mirvac, Downer EDI (Thursday); and IAG and Baby Bunting (Friday) (source: CommSec).
Wall Street is more than halfway through its quarterly earnings season. Most of the big guns have reported. The week ahead brings updates from the likes of Disney, Pfizer, Twitter and Coca-Cola. Economic data is fairly light, with Thursday night’s consumer inflation report looming as the most likely market mover.
The domestic economic calendar gets off to a busy start with reports due today on retail sales, job ads and services sector activity. Business confidence figures are due tomorrow and consumer sentiment on Wednesday. Reserve Bank Governor Philip Lowe is due to testify before the House committee on economics on Friday.
IPOs: the lightest week in months currently looks like this: WA1 Resources (Tuesday); Killi Resources (Thursday); and My Rewards International (Friday).
Commodities
Oil sealed a seventh straight weekly advance with a fresh seven-and-a-half-year high. Brent crude settled US$2.16 or 2.4 per cent ahead at US$93.27 a barrel. For the week, Brent gained 5.4 per cent. Friday’s advance came as a winter storm caused power outages in the oil-producing state of Texas.
“The latest upswing was triggered by a cold snap in Texas, which is fueling concerns about production outages in the Permian Basin, the largest U.S. shale play. A year ago, a period of extreme cold weather had caused massive disruptions to oil production there,” Carsten Fritsch, commodity analyst at Commerzbank, told clients.
BHP and Rio Tinto resisted much of Friday’s overseas selling pressure on miners as iron ore edger higher. BHP‘s US-traded depositary receipts firmed 0.64 per cent after its UK listing added 0.21 per cent. Rio Tinto gained 0.57 per cent in the US and lost 0.13 per cent in the UK. The spot price for ore landed in China edged up 65 US cents or 0.4 per cent to US$146.60 a tonne.
Gold overcame a US jobs-fuelled wobble to book its best weekly advance since mid-November. Gold for April delivery settled US$3.70 or 0.2 per cent ahead at US$1,807.80 an ounce after trading as low as US$1,792.10 intraday. The metal put on 1.2 per cent across the week.
Most industrial metals crept higher on thin volumes as low inventories helped offset currency pressures. Benchmark copper on the London Metal Exchange inched up 0.09 per cent to US$9,841.50 a tonne. Aluminium gained 0.79 per cent, nickel 0.55 per cent, zinc 0.44 per cent and tin 0.28 per cent. Lead eased 0.18 per cent.
