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ASX Today: ASX caps off worst week since GFC with more losses
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The share market was poised for early gains despite a negative night on Wall Street where gains in mining stocks were outweighed by declines in technology and other sectors.  

ASX futures edged up 16 points or 0.24 per cent, signalling a partial recovery from yesterday's sell-off. The S&P/ASX 200 faded to a loss of 27 points or 0.4 per cent yesterday after China's top banking regulator questioned stock and property valuations.

Overnight, gold rose for the first time in six sessions. Oil declined. Iron ore and copper advanced. The dollar climbed back above 78 US cents.

Wall Street

US stocks trimmed gains from their best session in nine months. The major indices faded in the last hour to finish at session lows. Miners benefitted from an on-going rotation from growth stocks that outperformed during the pandemic to cyclicals expected to rally as the economy recovers.

The Dow Jones Industrial Average was the best of the majors with a loss of 144 points or 0.46 per cent. The Nasdaq Composite resumed last week's heavy sell-off with a decline of 230 points or 1.69 per cent. The S&P 500 shed 32 points or 0.81 per cent.

“Markets may be trapped in a tug-of-war between what they expect to happen and pandemic-fuelled insecurities which are compounded by other, harder to quantify, market impulses,” Chris Hussey, managing director at Goldman Sachs, wrote. “On days like today, with no news and little macro to help investors keep the faith, we see ‘what ifs’ emerge — sideways trading, across all sectors, coupled by a pull back in rates.”

The tech sector dropped 1.6 per cent. Apple and Tesla were the biggest drags on the S&P 500, falling 2.1 and 4.5 per cent, respectively.

The tech-heavy Nasdaq came under pressure last week, skidding 4.9 per cent as bond yields surged. The index regained more than half on Monday with a bounce of 3.01 per cent. US ten-year bond yields retreated two basis points overnight after a mid-session rally faded.

Recent market tremors have raised questions about stock valuations relative to the health of the global economy. Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, yesterday told reporters a correction was inevitable.

Overnight, analysts at Janney Montgomery Scott in the US told clients, "US markets are within a reflationary expansion cycle (secular bull market) on a longer-term basis- but remain extended over the short-run. Continue to watch for a bigger correction ahead (upwards of -10-15%)."  

Australian outlook

This morning's positive futures reading owes much to overnight strength in our mining giants. BHP's US-listed stock gained 1.7 per cent and its UK-listed stock 1.9 per cent. Rio Tinto added 1.69 per cent in the US and 2.11 per cent in the UK. Both companies hit record levels here yesterday before fading to losses, along with most of the market.

The US materials sector finished 0.6 per cent ahead, an obvious boost to our mining-centric market. No other sector advanced. The financial sector and industrials both shed around 0.3 per cent.

While Monday's joyous start to the month appeared to herald a new up-leg in the post-pandemic recovery, yesterday's fade underlined how fragile sentiment has become. The ASX 200 flipped an early gain of 71 points into a loss of 27 points, raising fears "buy the dip" may become "sell the rally".

The health of the recovery will come under the spotlight this morning with the 11.30 am AEDT release of quarterly gross domestic product figures. The consensus among economists is for growth of around 2.5 per cent last quarter.  

The dollar continued to recover from last week's setback, rising 0.75 per cent this morning to 78.28 US cents despite the Reserve Bank's attempts to restrain the currency. The bank wheeled out the big guns on Monday, buying up $4 billion bonds to drive down yields. That had the additional effect of  temporarily depressing the dollar. However, the effect was fleeting as iron ore and copper rose overnight.   

"Rates vs commodities are the battleground for the AUD in 2021," Stephen Innes, Chief Global Market Strategist at Axi, said.

Commodities

Gold broke a five-session losing run, raising hopes of a bottom. Gold for April delivery settled $10.60 or 0.6 per cent ahead at US$1,733.60 an ounce. The NYSE Arca Gold Bugs Index jumped 4.6 per cent.

“Gold’s beatdown might be over,” Edward Moya, senior market analyst at Oanda, said.

The spot price for iron ore landed in China climbed $1.20 or 0.7 per cent to US$175.55 a tonne. Copper rallied 2.7 per cent to US$4.222 a pound.

Oil continued to lose ground ahead of tomorrow night's OPEC+ meeting, which is expected to discuss production increases. Brent crude settled 99 cents or 1.6 per cent lower at US$62.70 a barrel.

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