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Aussie shares will shoot for their first rise in eight sessions following a  rebound in European stocks and US equity futures during a US market holiday.

ASX futures rallied 47 points or 0.74 per cent. The advance raises hopes for a break in a losing run that has stripped 688 points off the S&P/ASX 200 since June 8.

Oil reversed to a gain overnight. Iron ore sank for a ninth session. Copper fell to its lowest since early October before bouncing higher. The dollar steadied below 70 US cents.

Europe

Banks and energy producers led as European stocks rebounded from last week’s losses. Trading volumes were constrained by the Juneteenth long weekend in the US.

The pan-European Stoxx 600 index climbed 0.96 per cent. Britain’s FTSE 100 index put on 1.5 per cent.

The financial sector climbed 3.3 per cent to lead gains. Banks slumped last week after the US Federal Reserve announced the biggest rate hike in 28 years, and central banks in Switzerland and Britain both raised.

Germany’s DAX index gained 1.06 per cent despite a surge in producer prices. German wholesale prices were a third higher last month than the same time last year, well above expectations.

French stocks trailled after President Emmanuel Macron lost his parliamentary majority over the weekend. Macron’s centrist coalition secured the most seats in the National Assembly, but fell short of an absolute majority. The CAC 40 index edged up 0.64 per cent.

The European Union has been struggling with vastly different borrowing costs among member countries as sovereign bond yields surge. Governments in Italy and Greece have had to pay much more to borrow than Germany and France.

The disparity under the constraints of the euro once again raised the risk of the currency bloc disintegrating. The crisis prompted the European Central Bank to announce plans last week for a new tool to address the issue.

US equity futures rallied with Europe. S&P 500 futures firmed 41 points or 1.11 per cent. Dow futures rose 256 points or 0.86 per cent. Nasdaq futures gained 129 points or 1.14 per cent.

Europe’s benchmark has fared better than Wall Street this year. The Stoxx 600 has fallen almost 17 per cent while the S&P 500 entered a bear market.

Turmoil on cryptocurrency markets temporarily abated. Bitcoin was this morning trading back above US$20,000 at US$20,548 after falling as low as US$17,630 over the weekend.  

Australian outlook

Is that… green? The S&P/ASX 200 appears to have broadly positive leads for the first time in an aeon.

US futures built nicely overnight as Europe ignored the commodities turmoil that swept Asia yesterday. Those pricing pressures have not dissipated for Australia’s miners, but strength in European banking, energy and travel stocks suggest there should be counter-balances for the ASX this session.

The market looks short-term oversold and due some respite, even if only for a session or two. Rallies in recent weeks have been treated as selling opportunities (“fading the rally”). Today will be another test of investors’ willingness to stay the course. Any sort of positive finish tonight would be a win for the bulls.

The Reserve Bank has two opportunities today to clarify the outlook for interest rates. First, Governor Philip Lowe delivers a speech on ‘Inflation and Monetary Policy’ at a Sydney event at 10 am AEST. Then at 11.30 am the central bank releases the minutes from this month’s policy meeting, which concluded with the biggest rate hike in 22 years.

The dollar steadied this morning, up 0.1 per cent at 69.53 US cents.

Commodities

Iron ore  turned negative for the year as Chinese steel mills cut production in the face of falling demand. Chinese housing construction has fallen sharply amid declining property prices and a debt crisis among developers.

“May was particularly bad, down somewhere between 30 and 40 per cent year on year on new starts,” Colin Hamilton, head of commodities research at BMO Capital Markets, told Britain’s FT.

Ore prices slumped 8 per cent yesterday to US$111.35 a tonne, according to S&P Global Platts. The spot price for ore landed at Tianjin fell US$3.38 or 2.6 per cent to US$128 a tonne.

BHP and Rio Tinto declined in UK trade. BHP‘s UK stock fell 1.59 per cent. Rio Tinto shed 1 per cent.

Oil hit a one-month low before recovering. Brent crude settled US$1.01 or 0.9 per cent ahead at US$114.13 a barrel after trading as low as US$111.52.

Prices plunged on Friday as crude belatedly responded to worries about demand destruction as inflationary pressures force consumers to reduce spending.

“We’ve got two really competing narratives happening,” Houston oil consultant Andrew Lipow told Reuters. “One is sanctions on Russian supplies. On the other hand, we see the high prices resulting in some demand destruction.”

“Friday’s steep price fall can be seen as a delayed reaction to the concerns about recession that have already been weighing on the prices of other commodities for some time,” Commerzbank analyst Carsten Fritsch said.

Copper touched its lowest since October 1 before recovering as the mood on the London Metal Exchange improved. Benchmark copper finished 0.3 per cent ahead at US$8,989.50 a tonne. Aluminium climbed 1.3 per cent, nickel 0.3 per cent, lead 0.6 per cent and zinc 0.5 per cent. Tin eased 1.3 per cent.

Gold was little changed ahead of the resumption of US trade. Gold for August delivery was lately down 50 US cents or 0.03 per cent at US$1,840.10 an ounce in electronic trade in the US.

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