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Aussie shares were primed for modest opening losses as a rebound in commodity prices helps offset declines on Wall Street.

ASX futures eased nine points or 0.13 per cent.

US stocks finished in the red after a final-hour fade. Iron ore, crude oil and metals rallied as Shanghai started to lift Covid restrictions.

Wall Street

The S&P 500 fell closer to a bear market as soft factory output and weak earnings from Cisco added to growth worries. Bargain-hunting in megacap growth stocks lifted the indices off their lows.  

The S&P 500 lost 23 points or 0.58 per cent. The broadest of the three major benchmarks closed roughly 18 per cent off its January peak.

The Dow Jones Industrial Average dropped 237 points or 0.75 per cent. The Nasdaq Composite dipped 30 points or 0.26 per cent.

Tech bellwether Cisco plunged 13.73 per cent after reporting an unexpected decline in Q1 sales. Supply-chain issues from Chinese lockdowns caused component shortages. The war in Ukraine knocked US$200 million off revenues.

The report exacerbated growing concerns about corporate earnings following disappointing trading updates this week from Target and Walmart. The retail giants reported increased transportation and labour costs eroded margins.

“The sharp sell-off in these companies (as well as other goods/consumer companies this quarter) shows that inflationary pressures are finally having an impact on earnings,” Maneesh S. Deshpande, head of US equity strategy at Barclays, said.

“Despite heightened inflation for a better part of a year, margins and forward earnings have remained resilient, which no longer seems to be the case.”

Factory output also seems to be under pressure. The Philadelphia Fed manufacturing index dropped to 2.6 this month from 17.6 in April. This month’s growth was the lowest in two years. The survey covers the mid-Atlantic region. A similar survey earlier this week showed manufacturing activity contracted in New York state.

Index heavyweight Apple was among the biggest drags, falling 2.46 per cent. Market giants trading at fresh 52-week lows overnight included companies as diverse as Bank of America, Walmart, Intel and Charles Schwab.

“The issue now is there really appears to be nowhere to hide,” Jonathan Krinsky, chief market technician with BTIG, wrote. “Money is rotating into cash instead of between different sectors,” he added.

The Nasdaq pared its falls as dip-buyers nibbled at the likes of Amazon +0.19 per cent, Nvidia +1.1 per cent and Twitter +1.19 per cent.

Australian outlook

The tremors from Wednesday night’s brutal sell-off in the US continued to reverberate overnight. A rebound on commodity markets has thrown the ASX a lifeline, but the outlook for today remains cautious at best.

The S&P/ASX 200 yesterday turned negative for the week, falling 1.65 per cent. What shocked was not so much the size of the fall but the identities of the companies leading the rout. Retailers Wesfarmers and Woolworths are among the ASX’s safest stores of wealth – classic “buy and forget” value stocks.

They are not meant to tumble 7.8 per cent, as Wesfarmers did yesterday. Metcash shed 6.54 per cent, Woolworths 5.61 per cent and Coles 3.41 per cent. Those falls will have even the staunchest of value investors re-examining their portfolios for weakness.

Consumer staples remained under pressure in the US overnight. The sector was the night’s worst performer, falling almost 2 per cent. Also weak were tech -1.07 per cent, industrials -0.94 per cent and financials -0.7 per cent.

Miners appear the best bet for the session ahead. The US materials sector gained 0.68 per cent. BHP and Rio Tinto rallied in US trade (more below).

The US healthcare and consumer discretionary sectors also inched higher. The energy sector fell 0.28 per cent even as crude rallied.

Commodity prices recovered as the US dollar backed off two-decade highs. The Australian dollar bounced 1.33 per cent to 70.51 US cents.

AMP, InvoCare and Resolute Mining hold annual general meetings today.

Commodities

Iron ore and industrial metals rallied as Shanghai started to lift its Covid lockdown. Most citizens of the port city were allowed to shop yesterday for the first time in almost two months. Public transport was scheduled to restart in stages from this weekend.

The spot price for iron ore landed at Tianjin bounced US$1.11 or 0.9 per cent to US$131.03 a tonne. The most-traded September futures contract on the Dalian Commodity Exchange climbed 3.4 per cent.

Benchmark copper on the London Metal Exchange rose 2.3 per cent to US$9,460.50 a tonne. Aluminium gained 2 per cent, nickel 8 per cent, lead 0.8 per cent, zinc 2.9 per cent and tin 3.6 per cent.

“The fact that copper is holding up today with the S&P 500 down, points to some underlying strength,” Ole Hansen, head of commodity strategy at Saxo Bank, wrote.

“That strength is fundamentally based, with signs of lockdowns being lifted in China and low inventories which aren’t there to cope with a potential pick-up in demand.”

BHP‘s US-traded depositary receipts bounced 3.21 per cent. The miner’s UK stock gained 0.52 per cent. Rio Tinto swung to a gain of 1.89 per cent in the US after falling 0.47 per cent in the UK.

Gold had its best session in roughly a month as the greenback retreated. Metal for June delivery settled US$25.30 or 1.4 per cent ahead at US$1,841.20 an ounce.

The NYSE Arca Gold Bugs Index jumped 5.42 per cent as investors sought alternative havens from selling in other traditional defensive sectors.

Oil strengthened on the prospect of improved Chinese demand as Shanghai reopens. Brent crude settled US$2.93 or 2.7 per cent ahead at US$112.04 a barrel.

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