ASX Today: Rebound ahead as Wall Street bounces

Aussie shares look set to trim a losing month after a retreat in treasury yields helped Wall Street rebound from its worst week this year.

US stocks rallied more than 1 per cent in early trade before paring gains. Gold and copper bounced off multi-week lows. Iron ore and oil declined. The Australian dollar inched off a seven-week low.

The S&P/ASX 200 will open 34 points or 0.47 per cent higher, according to futures action. The Australian benchmark slumped 1.12 per cent yesterday, extending its loss for the month to 3.4 per cent.   

The last major day of the interim earnings season brings updates from Harvey Norman, Adbri and Sandfire Resources.

Wall Street

US stocks clawed back some of last week’s heavy losses as a retreat in bond yields encouraged bargain-hunting.

The S&P 500 rallied 12 points or 0.31 per cent. The Dow Jones Industrial Average gained 72 points or 0.22 per cent. The Nasdaq Composite advanced 72 points or 0.63 per cent.

“A little bit of a bounce because Friday’s reaction was an overreaction,” Ken Polcari, managing partner at Kace Capital Advisors, told Reuters.

All three indices were up more than 1 per cent shortly after the opening bell as bond markets continued to dictate direction. The rally lost some of its heat as treasury yields moved off their lows. Yields move inversely to prices.

The yield on two-year US treasuries hit its highest since 2007 on Friday after a rebound in inflation prompted investors to revise their expectations for the peak of this rates cycle. US stocks tumbled to their heaviest weekly losses of the year. The S&P 500 gave up 2.7 per cent, the Dow 3 per cent and the Nasdaq 3.3 per cent.

“Because of the renewed focus on hotter inflation and the implications for the Fed, rates are once again driving equities,” Ross Mayfield, investment strategy analyst at Baird, said. “The rapid shift in Fed funds expectations and the spike in short-term yields has been risk-off in the stock market, so some reprieve on rates today will likely boost equities.”

The night’s economic data showed the economy continued to expand last month. Business investment rose at the fastest pace in five months. Pending home sales rose for a second month.

Orders for durable goods declined 4.5 per cent, but the drop was entirely attributed to shifting seasonal demand for commercial aircraft. Minus transportation, new orders increased 0.7 per cent.

Morgan Stanley said it no longer expects a rate cut this year. The bank’s economists moved their forecast for the first cut of this cycle from December to next March.

UK banks Barclays and NatWest said Friday’s inflation surprise could force the Federal Reserve to raise benchmark rates by half a percentage point next month.

Australian outlook

A welcome, if somewhat unconvincing, bounce on Wall Street points to early gains for the S&P/ASX 200. The Australian benchmark looks ripe for short-term relief after sinking 1.12 per cent yesterday and 3.4 per cent for the month. The usual end-of-month institutional “window dressing” should help.

Respite came overnight in the form of retreats in both the US dollar and treasury yields. Dollar-denominated commodity prices rebounded from multi-week lows (more below).

A tentative “risk on” session saw US defensive sectors retreat while traders targeted stocks with better exposure to economic growth. Consumer discretionary and industrial stocks set the pace, rising 1.18 and 0.83 per cent, respectively. Tech gained 0.52 per cent, energy 0.31 per cent and materials 0.22 per cent.

The biggest drags were utilities -0.76 per cent, healthcare -0.3 per cent and consumer staples -0.18 per cent.

The dollar traded below 67 US cents for the first time since January 3. The Aussie traded as low as 66.97 US cents before recovering to trade 0.07 per cent ahead at 67.38 US cents.

A month of interim earnings wraps up today with updates from Harvey Norman, Adbri, Nickel Industries, Sandfire Resources, Swoop, Sezzle, NextDC, Piedmont Lithium, PointsBet, Cooper Energy, McPherson’s and Tyro Payments.

The domestic economic calendar offers weekly consumer confidence data and monthly reports on retail sales, current account and private sector credit.

Origin Energy, Amcor, Accent Group, Evolution Mining, MyState, Worley, Bega Cheese and Domino’s Pizza trade ex-dividend.

Commodities

US gold miners rallied as gold logged its first rise in six sessions. Gold for April delivery settled US$7.80 or 0.4 per cent higher at US$1,824.90 an ounce, rebounding from its weakest close of the year. The NYSE Arca Gold Bugs Index of US miners climbed 0.63 per cent.

Copper touched a seven-week low before rebounding as the US dollar backed off its highest since the first week of the year. Benchmark copper on the London Metal Exchange rallied 1.35 per cent to US$8,834 a tonne after trading as low as US$8,670.

Aluminium rallied 1.27 per cent to US$2,65.06. Nickel bounced 4.4 per cent to US$25,400. Lead gained 2 per cent. Zinc added 1.15 per cent. Tin eased 0.48 per cent.

Iron ore retreated after Chinese authorities capped steel production at the industrial hub of Tangshan in response to heavy pollution. Steel mills were set to reduce sintering capacity by up to half after the regional government declared a level 2 emergency.   

The most-traded May ore contract on the Dalian Commodity Exchange ended daytime trade 2.5 per cent lower at 885.5 yuan (US$127.14) a tonne.

BHP‘s US-traded depositary receipts finished 0.04 per cent ahead following a 0.02 per cent dip in UK trade. Rio Tinto swung to a gain of 0.38 per cent in the US after losing 0.34 per cent in the UK.

Nine weeks of increases in US crude stockpiles kept oil under pressure. Brent crude settled 71 US cents or 0.9 per cent lower at US$82.45 a barrel. The front-month contract was on track for a monthly loss of 2.4 per cent.

“The downbeat mood reflects the continued build-up of crude inventories week after week despite talks of a tight market,” Manish Raj, managing director at Velandera Energy Partners, said. “Clearly, the physical market isn’t as tight as the market chatter portrays it to be.”

Battery metal miners bounced off a seven-week low. The Global X Lithium & Battery Tech ETF rallied 1.27 per cent on the New York Stock Exchange.