Two days of steady gains and record closes in the US point to a positive start to Australian trade ahead of a keenly-awaited Federal Reserve meeting and Australian employment update.
ASX futures climbed 13 points or 0.18 per cent. The S&P 500 logged back-to-back record closes over the Queen's birthday long weekend despite some caution ahead of tomorrow's Fed policy update.
Iron ore rose on Friday, then declined yesterday. Oil built on two-year highs. Gold was the weekend's biggest loser, dropping around US$30 in two hops.
US stocks came good late this morning as investors favoured growth stocks heading into this week's Fed meeting. Gains in tech stocks outweighed declines in cyclicals as the S&P 500 edged up eight points or 0.18 per cent to a new closing high.
The growth stock-heavy Nasdaq Composite rallied 105 points or 0.74 per cent. The cyclical stock-heavy Dow Jones Industrial Average eased 86 points or 0.25 per cent.
On Friday, the S&P 500 put on eight points or 0.19 per cent, finishing at a record. The Nasdaq gained 49 points or 0.35 per cent. The Dow inched up 13 points or 0.04 per cent.
Growth stocks outperformed overnight in a sign the equity market expects the Fed to stick to its mantra that this year's spike in inflation will be transitory, allowing the bank to maintain record-low rates and keep buying bonds. Bond markets, however, appeared to send a different message. The yield on ten-year US treasuries climbed almost five basis points, back above 1.5 per cent.
The Federal Open Market Committee starts a two-day meeting tonight and will update the market tomorrow night. While no changes to policy settings are expected, some analysts think the bank will prepare the market for a shift in the months ahead.
"Given the shift in the mix of inflation from transitory towards sustainable, the risk of a hawkish tilt within the [Federal Open Market Committee] has increased," analysts at Morgan Stanley told clients.
Billionaire hedge fund manager Paul Tudor Jones warned of a possible "taper tantrum" if the Fed signals a change of direction.
“If they course correct, if they say, ‘We’ve got incoming data, we’ve accomplished our mission or we’re on the way very rapidly to accomplishing our mission on employment,’ then you’re going to get a taper tantrum,” he told CNBC. “You’re going to get a sell-off in fixed income. You’re going to get a correction in stocks. That doesn’t necessarily mean it’s over.”
Overnight, the Russell 1000 Growth Index rallied 0.86 per cent, versus a 0.53 per cent drop in the Value Index. Apple, Amazon, Microsoft, Facebook and Netflix all advanced.
No red flags over the long weekend. The S&P 500 shrugged off a rebound in bond yields overnight, eking out another record close. However, the action suggested equity and bond traders have different expectations for tomorrow night's Fed policy update, raising the possibility of a dislocation for one or other and possibly both tomorrow night.
The S&P/ASX 200 entered the long weekend at a high, rising ten points or 0.13 per cent on Friday to a record finish. The index secured a fourth straight weekly advance despite a choppy run as the great inflation debate raged on Wall Street.
The tech sector topped US gains overnight, rising 1.04 per cent. The biggest drags were the two sectors that matter most here. Materials fell 1.28 per cent. Financials shed 1.03 per cent.
Today brings the minutes from this month's Reserve Bank policy meeting (11.30am AEST). The minutes should provide some insight into expected policy tweaks at next month's meeting. Quarterly house price figures are due at the same time.
Thursday brings a potential market-mover in the May employment report. The report will attract more interest than usual due to the end of the JobKeeper scheme in March. Economists surveyed by Bloomberg expect the unemployment rate held steady at 5.5 per cent as the economy added around 30,000 new positions.
Also on Thursday, RBA Governor Philip Lowe is due to deliver a speech on the recovery to a conference in Queensland.
The rush to list while markets are hot means ten companies are currently scheduled to make their debuts this holiday-shortened week, according to ASX data. Monger Gold, Polymetals Resources and OZZ Resources were slated to be be the first cabs off the rank today, followed by HitIQ and Lunnon Metals (Wednesday); Arcadia Minerals, Balkan Mining and Minerals, and Gefen International (Thursday); and Cosmo Gold and Torque Metals (Friday). Note that IPOs are frequently subject to last-minute delays and cancellations.
Coles and Challenger hold strategy/investor days on Thursday. Trading volumes will spike mid-week as various index and equity derivatives expire on Thursday.
The dollar edged up 0.07 per cent overnight to 77.13 US cents.
BHP and Rio Tinto turned lower in overseas trade, reversing most of Friday's gains as iron ore retreated. BHP's US-listed stock dropped 0.5 per cent and its UK-listed stock lost 0.51 per cent. On Friday, the Big Australian gained 0.82 per cent in the US and 1.36 per cent in the UK.
Rio Tinto shed 0.58 per cent overnight in the US and 0.44 per cent in the UK. On Friday, Rio added 0.67 per cent in the US and 1.43 per cent in the UK.
The spot price for iron ore landed in China retreated $5.30 or 2.5 per cent to US$210.50 a tonne. The ore price edged up $2.95 or 1.4 per cent on Friday.
Rebounds in cryptocurrencies and US treasury yields added to down-pressure on gold. Metal for August delivery settled $13.70 or 0.7 per cent weaker at US$1,865.90 an ounce after falling $16.80 on Friday. The NYSE Arca Gold Bugs Index eased 0.74 per cent.
Oil edged higher over two sessions. Overnight, Brent crude settled 17 cents or 0.2 per cent ahead at US$72.86 a barrel. On Friday, the global benchmark also gained 17 cents or 0.2 per cent.
"Crude and product prices have consistently marched higher in 2021, as the prospect of a global demand recovery has overshadowed the potential for new supply to hit the market,” Robbie Fraser, global research and analytics manager at Schneider Electric, told MarketWatch.
Chinese threats to curb commodity prices continued to cast a cloud over copper's prospects. Benchmark copper on the London Metal Exchange fell 0.4 per cent overnight to US$9,938.25 a tonne. Aluminium rallied 1.8 per cent and nickel 1.3 per cent. Lead lost 0.4 per cent and tin 0.1 per cent. Zinc closed flat.