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A tech-led advance in the US and a retreat in the dollar point to further gains for the ASX this session.

ASX futures rallied 28 points or 0.37 per cent as the Dow and S&P 500 edged to fresh highs.

The advance sets up the S&P/ASX 200 for another record following yesterday’s breather. The Australian benchmark finished little changed yesterday, up four points or 0.05 per cent as the market digested a heavy diet of corporate earnings.  

Overnight, a strengthening US dollar pushed most commodities lower. The Australian dollar retreated towards the lower end of its recent trading range.

Wall Street

A recovery in Big Tech steered Wall Street higher as jobs data met expectations and the market largely shrugged off surging producer prices.  

After trailling the other benchmarks this week, the Nasdaq Composite outperformed, rising 51 points or 0.35 per cent. The S&P 500 climbed 13 points or 0.3 per cent to a fresh high. The Dow Jones Industrial Average turned positive in the final minutes of trade, eking out a closing high with a gain of 15 points or 0.04 per cent.

Five tech giants that account for roughly a quarter of the market weighting of the S&P 500 advanced. Apple gained 2.08 per cent, Microsoft 1 per cent, Facebook 0.75 per cent, Alphabet 0.67 per cent and Amazon 0.35 per cent.

“The move into big tech is simply a trading opportunity. Big tech has been down for a week or so, underperforming the market pretty significantly,” Tim Ghriskey, chief investment strategist at Inverness Counsel, told Reuters. “There are bargain hunters coming in, jumping on those securities.”

A growth scare that unsettled markets last month continued to fade as a decline in jobless claims underlined the strength of the labour market. First-time claims for unemployment benefits fell from 387,000 to 375,000 last week, in line with expectations. Continuing claims dropped to their lowest since mid-March 2020.

The cyclical sectors that have led all week took a break after an increase in wholesale prices. Producer prices climbed 1 per cent last month, ahead of the 0.6  per cent consensus among economists polled by The Wall Street Journal. The producer price index has risen 7.8 per cent in the last 12 months, the hottest pace since the early 1980s.

“Industrials, Materials, and Energy all led the S&P 500 through the last few sessions, supported in parted by the hopes for increased infrastructure spending, but are now the worst performers today,” Goldman Sachs analyst Chris Hussey wrote. “Conversely, we’re seeing a rotation back into long duration stocks, including Tech, Healthcare, and Comm Services.”

Trading volumes have faded this week as another quarterly reporting season wound down and traders awaited fresh catalysts. August is also the traditional holiday season in the US. Volume overnight was more than a billion shares lower than the 20-day average of 9.55 billion, according to Reuters.

Australian outlook

Blue skies ahead, if futures trading proves correct. A decline in the dollar should encourage overseas buyers. The Aussie retreated 0.37 per cent to 73.4 US cents. The local unit has settled in a tight range between 73 and 74 US cents, capped by the economic hit from lockdowns.  

The S&P/ASX 200 has glided serenely higher all week, supported by broadly positive corporate earnings and the knowledge lockdowns guarantee loose monetary policy for years to come. The index took a breather yesterday for no obvious reason other than the size of Rio Tinto’s dividend payment, which alone knocked more than ten points off the index. That limited yesterday’s advance to four points or 0.05 per cent.

The full-year reporting season enters a lull today before accelerating next week. Among the few companies reporting today are Baby Bunting and Bailador Technology Investments.

Sector moves in the US overnight were modest. Health and tech were the best of the bunch with rises of 0.77 and 0.59 per cent, respectively.

Financials inched up 0.13 per cent. Materials dipped 0.19 per cent, industrials 0.23 per cent and energy 0.49 per cent.

Commodities

Iron ore fell to a four-month low after Chinese authorities issued an air quality plan for the Winter Olympics in February. The plan includes steel production caps to curb emissions. The spot price for ore landed in China dropped US$4.75 or 2.9 per cent to US$161.45 a tonne.

“The continued tightening of Hebei’s production limit means that the country’s crude steel production will fall more than previously expected,” Sinosteel Futures analysts wrote.

BHP‘s US-listed stock fell 1.39 per cent and its UK-listed stock shed 1.42 per cent. Rio Tinto lost 1.62 per cent in the US and 1.05 per cent in the UK.

Oil eased as reports from the International Energy Agency and OPEC highlighted the potential demand hit from the Covid delta variant. Brent crude settled 13 US cents or 0.2 per cent lower at US$71.31 a barrel.

Gold dipped in light, holiday-affected volume despite further evidence of inflationary pressures in the US. Metal for December delivery settled US$1.50 or 0.1 per cent lower at US$1,751.80 an ounce. The NYSE Arca Gold Bugs Index fell 1.72 per cent.

Nickel stood out during an otherwise negative session on the London Metal Exchange. Benchmark nicked climbed 1.6 per cent to US$19,659 a tonne after a report showed Chinese production declined 15.7 per cent over the first seven months of the year.

Copper dropped 0.5 per cent, aluminium 0.1 per cent, lead 0.7 per cent, zinc 1.8 per cent and tin 1.2 per cent.

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