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The share market’s winning run faces early pressure following declines in mining giants BHP and Rio Tinto during a mixed night on Wall Street.
The S&P/ASX 200 was set to open 26 points or 0.38 per cent lower this morning, according to futures moves. The Australian benchmark has risen for the last four sessions, closing last night at a six-week high.
BHP and Rio Tinto loom as headwinds after iron ore fell to a two-year low in Singapore. Copper, gold and other metals also declined.
Oil rose for a third session. The dollar fell around half a percentage point.
Wall Street
Wall Street’s main indices took wildly differing paths as investors weighed “Goldilocks” economic growth data and a mixed batch of third-quarter corporate earnings.
Well-received trading updates from Caterpillar and Honeywell powered the Dow Jones Industrial Average to a fifth straight gain. The blue-chip average put on 194 points or 0.61 per cent.
The S&P 500 dropped 23 points or 0.61 per cent following a dire result from Facebook owner Meta Platforms. The Nasdaq Composite dived 178 points or 1.63 per cent.
The Dow rallied after better-than-expected GDP data soothed fears about the strength of the US economy. Gross domestic product expanded by 2.6 per cent in the September quarter, rebounding from two consecutive quarters of contraction.
Economists had forecast a smaller improvement of around 2.3 per cent. Importantly, a measure of the cost of living came in much weaker than expected.
“The GDP release this morning was a goldilocks number for risk assets. Top line growth was solid, though consumption decelerated, it was still positive, highlighting resiliency in the major driver of the US economy,” Cliff Hodge, CIO at Cornerstone Wealth, said.
“The major bright spot… was in prices. The GDP Price index slowed dramatically quarter over quarter and came in below expectations. This is another sign pointing to the likelihood that the worst of inflation may be behind us,” he added.
Treasury yields fell to two-week lows, easing pressure on borrowing-dependent corners of the market. The ten-year US yield dropped back under 4 per cent, lately down almost ten basis points at 3.91 per cent.
Meta Platforms was the biggest drag on the S&P 500 and Nasdaq. The Facebook owner plunged 24.56 per cent following disappointing earnings and a soft outlook.
Meta’s grim result continued a run of disappointing updates from Big Tech this reporting season. Microsoft and Alphabet (Google) dived on Wednesday after falling short on key metrics. Apple and Amazon were due to report after this morning’s closing bell.
European stocks finished little changed after the European Central Bank raised its benchmark rate by 75 basis points to 1.5 per cent, as expected. The pan-European Stoxx 600 index dipped 0.03 per cent.
Australian outlook
A winning week for Australian investors looks likely to end on a soft note as the heavily-weighted major miners drag (more below). The materials sector powered yesterday’s 0.5 per cent rally on the S&P/ASX 200, but looks likely to drag today.
However, any damage should be minimal after a week that has seen the Australian benchmark put on almost 170 points or 2.5 per cent so far. Importantly, the S&P/ASX 200 ground through technical resistance yesterday, closing at a level last seen in mid-September.
Iron ore and metals fell as the US dollar rebounded. The Aussie declined 0.54 per cent to 64.6 US cents.
How this session finishes up will be determined to some extent by wholesale inflation data and the reaction in the US to after-hours earnings from Amazon and Apple. Amazon was lately down 20.5 per cent in extended trade.
Quarterly wholesale inflation figures at 11.30 am AEDT will attract more interest than usual after Wednesday’s nasty consumer inflation surprise. Economists expect the Producer Price Index to moderate a fraction from quarterly growth of 1.4 per cent in the June quarter to 1.3 per cent. Another “hot” result would further the argument for a 50 basis point rate hike next week.
The best-performing sectors in the US overnight were industrials +1.15 per cent (strong results from Caterpillar and Honeywell), financials +0.75 per cent and utilities +0.69 per cent.
The energy sector firmed 0.27 per cent as crude rose for a third night. Weights included Big Tech (communication services -4.12 per cent) and materials -0.26 per cent.
Back home, Macquarie Group reports half-year today earnings today. There are annual general meetings for shareholders in Carsales.com, SkyCity Entertainment, McMillan Shakespeare, Polynovo, ARB Corporation and GWA.
Commodities
Australian heavyweights BHP and Rio Tinto fell in overseas trade as an increase in steel inventories and weak Chinese industrial profits drove iron ore sharply lower.
Benchmark ore in Singapore fell more than 4 per cent to a two-year low. Ore for November delivery hit US$82.45, a level last seen in May 2020, before paring its loss to 4.3 per cent at US$82.85.
The most-traded ore contact on China’s Dalian Commodity Exchange dropped 4.1 per cent to 643.50 yuan (US$89.29) a tonne.
Prices slumped after data yesterday showed profits at China’s industrial companies declined 2.3 per cent across the first nine months of the year as a property slump deepened and parts of the country faced Covid lockdowns. A retreat in ore prices accelerated this week after China reaffirmed its zero-Covid policy.
“Expectation for stronger/nationwide easing is muted, as there is no change in policy narrative after the National Congress, home prices remains weak, investors’ confidence on developers’ liquidity remains low,” JPMorgan analysts wrote.
BHP‘s US-traded depositary receipts declined 2.27 per cent. The miner’s UK listing fell 3.14 per cent. Rio Tinto gave up 3.8 per cent in the US and 3.7 per cent in the UK.
Industrial metals reversed some of Wednesday night’s bumper gains on the London Metal Exchange. Benchmark copper on the LME declined 0.6 per cent to US$7,838.25 a tonne. Aluminium lost 2.2 per cent, nickel 1.3 per cent, lead 1.5 per cent and zinc 0.2 per cent. Tin edged up 0.1 per cent.
“People were starting to get a bit bullish yesterday with copper stocks tight, but it was overdone and also the [US] dollar is stronger today, so the market is pulling back,” Robert Montefusco at broker Sucden Financial told Reuters.
Oil rose to a three-week high after a rebound in US GDP data soothed concerns about demand. Brent crude settled US$1.27 or 1.3 per cent ahead at US$96.96 a barrel.
Gold backed off a two-week high as the US dollar rallied. Gold for December delivery settled US$3.60 or 0.2 per cent lower at US$1,665.60 an ounce. The NYSE Arca Gold Bugs Index fell 1.49 per cent.
