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The share market faces an uncertain start after Greater Sydney and Darwin slid into lockdown, overshadowing positive leads from Wall Street and commodity markets.

ASX futures edged up five points or 0.07 per on Saturday morning as the S&P 500 rallied to a new high. Iron ore, crude and precious metals improved.

A weekend of negative Covid developments muddied the outlook for the session. The NSW government declared a two-week lockdown over an area covering around a quarter of the Australian population. Darwin announced a snap 48-hour lockdown. Queensland recorded three new cases. Western Australia announced fresh restrictions.

Wall Street

US stocks rallied after the banking sector passed financial stress tests, and soft inflation data soothed rate-hike worries. The S&P 500 climbed 14 points or 0.33 per cent to a record close.

The Dow Jones Industrial Average rose 237 points or 0.69 per cent as strong earnings lifted Nike 15.53 per cent. The Nasdaq Composite dipped nine points or 0.06 per cent after an uptick in bond yields depressed buying interest in growth stocks.

The financial sector was the session’s best performer, rising 1.25 per cent after the Federal Reserve eased pandemic-era restrictions that required lenders to retain a substantial buffer of capital against a severe recession. Lenders will be allowed to return more capital to investors in the forms of dividends and share buybacks.

Wells Fargo gained 2.66 per cent, Bank of America 1.93 per cent and JPMorgan Chase 1.01 per cent.

“A year ago the Fed saw a lot of uncertainty and really wanted the banks to have an abundance of caution,” Christopher Marinac, research director at Janney Montgomery Scott, told Reuters. “It is now time to release the extra capital and let the banks go back to the new normal.”

Worries about the likely pace of rate rises were soothed by soft spending and inflation data. Consumer spending was flat last month, missing expectations for an increase of around 0.4 per cent. Core consumer price inflation also came in below economists’ expectations.

“The most interesting, salient takeaway from today’s data is that we’re not seeing runaway inflation,” Boris Schlossberg, managing director of FX strategy at BK Asset Management, told CNBC. “The Fed by holding its fire is probably on the right side of the trade at this point.”

The materials and industrial sectors found support from a bipartisan infrastructure spending deal announced on Thursday. The White House declared it had secured enough support to pass a package that will pump money into roads, bridges and other physical assets.

“The positive news from the infrastructure package favours the S&P 500 more than then Nasdaq. The Nasdaq does not pour cement into roads and put steel in bridges. That’s the S&P 500,” Jake Dollarhide, chief executive officer of Longbow Asset Management, told Reuters.

Australian outlook

Greater Sydney’s slide back into lockdown over the weekend distorts the outlook for the day. An area covering around six million people or almost a quarter of the population of Australia has shut down until July 9 at the earliest.

Covid numbers continued to track in the wrong direction over the weekend. Darwin announced a snap two-day lockdown yesterday after four new cases. NSW Health yesterday reported 30 new locally-acquired cases in the 24 hours to 8 pm Saturday.

The state reported 29 cases on Saturday, the day the government pulled the pin on a full lockdown for Greater Sydney, the Central Coast, Blue Mountains and Wollongong. State Premier Gladys Berejiklian warned case numbers were likely to get worse before they got better.

Travel and tourism stocks may feel the pinch, although there have been signs in recent months that investors have become inured to periodic lockdowns, so long as they were contained and relatively brief. Potential winners include companies that benefit from the stay-at-home economy: e-tailers, supermarkets and food delivery services.

Data yesterday showed profit growth in China’s industrial sector slowed last month as surging commodity prices strangled margins. While profits were 36.4 per cent stronger than last May, that was down from growth of 57 per cent in April.

The S&P/ASX 200 wobbled last week, falling around 0.8 per cent during a stop-start week defined by questions over the outlook for rates and by growing Covid worries. The weekly loss broke a run of five straight weekly advances stretching back to mid-May.

The old financial year winds up on Wednesday. The bulk of tax loss selling ought be done, but there will be some portfolio reshuffling and volatility as one year ends and another begins.

The economic calendar is light through the first half of the week before picking up on Wednesday with a speech from RBA Governor Philip Lowe, as well as private sector credit data and Chinse PMIs. Thursday brings trade and manufacturing figures. The week winds up with home loans on Friday. 

The IPO flood shows no sign of easing. This week brings the biggest float of the year to date. PEXA Group, which lists on Thursday, is an online property transfer firm that handles more than 300,000 transactions per month. The company is valued at around $3 billion. Current owners include CBA, Link Administration and Morgan Stanley.

The rest of the IPO line-up at time of writing includes: Camplify, WAM Strategic Value and Barton Gold Holdings (today); Polymetals Resources, East 33 (Tuesday); Tamboran Resources, Butn, OZZ Resources (Wednesday); and Resource Base, Silk Logistics, BlueBet, NexGen Energy, Lode Resources, Clean TeQ Water and 29Metals (Friday).

The dollar rallied 0.27 per cent this morning to 75.77 US cents.

Commodities

Iron ore finished higher for the week, thanks to a rise on Friday.  The spot price for ore landed in China climbed US$3.80 or 1.8 per cent to US$218.70 a tonne on the day for a weekly advance of US$1.40 or 0.6 per cent.

BHP’s US-listed stock gained 0.6 per cent after its UK-listed stock rallied 2.13 per cent. Rio Tinto put on 0.24 per cent in the US and 1.03 per cent in the UK.

Oil sealed a fifth straight weekly advance as prices settled at their highest since October 2018. Brent crude finished 62 cents or 0.8 per cent ahead at US$76.18 a barrel.

Gold inched higher at the end of a choppy week as traders continued to mull the outlook for rates. Metal for August delivery settled $1.10 or 0.1 per cent ahead at US$1,777.80 an ounce.

For the week, the yellow metal gained around 0.5 per cent, breaking a run of three straight losing weeks. The NYSE Arca Gold Bugs Index eased 0.64 per cent on Friday.

Copper finished flat, but most other industrial metals improved as the promise of a US infrastructure spending splurge helped support demand. Benchmark copper on the London Metal Exchange eased US$3.35 or less than 0.1 per cent to US$9,388.40 a tonne. Aluminium rose 2 per cent, nickel 0.5 per cent, lead 0.2 per cent and tin 0.3 per cent. Zinc dipped 0.3 per cent.

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