Futures trading pointed to further down-pressure on the Australian share market as Covid-19 lockdown woes and declines in miners outweighed record finishes in the US.
ASX futures declined 15 points or 0.21 per cent after BHP and Rio Tinto retreated in overseas trade and the WA government announced a four-day lockdown for Perth and Peel.
The S&P 500 and Nasdaq finished at all-time highs. The Dow eased more than 0.4 per cent as traders rotated from cyclicals to growth stocks.
US stocks finished mixed but mostly higher as a dive in bond yields favoured growth stocks over cyclicals. The yield on ten-year US treasuries slid more than five basis points back below 1.5 per cent.
The S&P 500 rose ten points or 0.23 per cent to a third straight record close. The Nasdaq Composite rallied 140 points or 0.98 per cent, thanks in part to a late boost from Facebook.
The social media giant jumped 4.18 per cent after a federal court threw out an antitrust case filed by the Federal Trade Commission that might have forced the company to divest WhatsApp and Instagram.
The Dow Jones Industrial Average declined 151 points or 0.44 per cent. Boeing was the biggest drag on the blue-chip average, falling 3.39 per cent after the US regulator told the aircraft manufacturer its new widebody jet, the 777X, was unlikely to be certified until mid to late 2023.
Tech was the only sector to advance more than 1 per cent as computer chipmakers made gains. Nvidia put on 5.01 per cent and Broadcom 2.29 per cent. Apple, Microsoft and Amazon all gained at least 1.25 per cent.
Cyclical stocks were depressed by data showing Asia faces a resurgence of Covid as vaccination rates trail the US and Europe. Japan, India and Malaysia have reported record surges in infections in recent days. The energy sector skidded 3.33 per cent ahead of an OPEC+ meeting on Thursday.
“It’s end of the quarter and investors may want to take some profits and rotate out of energy and stick with tech, which has been the winner,” Sam Stovall, chief investment strategist at CFRA Research, told Reuters.
“At the sector level, the rates math is characteristically resulting in outperformance of high dividend yield (Utilities, Staples) stocks while Financials are lagging. Energy is the worst performing sector as the broader reflation trade is put on hold,” Goldman Sachs’ Chris Hussey told clients.
No relief in sight yet for local investors. Covid concerns were sharpened by news Perth and Peel entered a four-day lockdown from midnight last night. The new restrictions were to contain a local outbreak related to the Sydney cluster that expanded to three cases yesterday.
The underlying dynamics of the overnight action in the US do not play to the ASX’s strengths. US financials fell 0.81 per cent, industrials 0.52 per cent and energy 3.33 per cent. The materials sector finished flat, but local index heavyweights BHP and Rio Tinto both declined.
The best prospects for today were tech (+1.11%) and high-yield sectors that attract funds when bond yields fall. These traditionally include utilities, healthcare, real estate and consumer staples.
The lockdown trade played out predictably yesterday. Travel and tourism, casinos and shopping centres declined. Supermarkets and e-tailers rallied.
The local market has struggled for traction over the last week as the Sydney Covid cluster expanded. The S&P/ASX 200 has risen just once in the last four sessions. However, the index remains less than 100 points from record levels, so the current malaise looks more like a pause than a major setback.
Weekly consumer sentiment figures are due this morning. Polymetals Resources is scheduled to list today, according to ASX data. The company aims to develop gold projects in Guinea, West Africa.
The dollar retreated 0.36 per cent to 75.67 US cents.
Oil fell to its weakest level in more than a week ahead of Thursday’s OPEC+ meeting. Buying interest was dented by lockdowns in Australia, Covid setbacks in Asia and Europe, and concerns the OPEC+ cartel will lift production. Brent crude settled US$1.24 or 1.6 per cent lower at US$74.14 a barrel.
Tyler Richey, co-editor at Sevens Report Research, said there was a “resurgence in COVID-19 fears as case counts are rising sharply in parts of Asia, while the ‘Delta variant’ of the virus is stoking concerns that the reopening process in Europe will stall, or even take a step backwards this summer.”
Iron ore added to last week’s gains. The spot price for ore landed in China improved US$1.35 or 0.6 per cent to US$220.05 a tonne.
BHP’s US-listed stock declined 0.57 per cent and its UK-listed stock lost 0.74 per cent. Rio Tinto shed 0.66 per cent in the US and 0.99 per cent in the UK.
Gold inched higher for a second night. Metal for August delivery settled $2.90 or 0.2 per cent ahead at US$1,780.70 an ounce. The NYSE Arca Gold Bugs Index fell 1.22 per cent.
Copper retreated after weekend data showed profits at Chinese industrial firms slowed as surging prices of raw materials crimped margins and dented output. Benchmark copper on the London Metal Exchange eased 0.3 per cent to US$9,361.25 a tonne. Nickel dropped 1.3 per cent and zinc 0.1 per cent. Tin gained 1.9 per cent, aluminium 0.2 per cent and lead 1.6 per cent.