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The share market’s six-session win streak faces early pressure following a late fade on Wall Street and declines in key commodities.

ASX futures dropped 40 points or 0.54 per cent. The S&P/ASX 200 has risen for nine of the last ten sessions, but gains have shrunk in recent days. Four of the last five advances have been smaller than 0.1 per cent.  

Overnight, Wall Street finished mixed but broadly lower as strong earnings  from Microsoft and Alphabet were offset by declines in energy, mining and banking stocks. Resource stocks retreated with crude, iron ore and industrial metals.

Wall Street

A mixed market saw resilience in tech stocks and a sell-off in cyclical sectors as commodity prices and treasury yields cooled off.

The Dow Jones Industrial Average retreated 266 points or 0.74 per cent from Tuesday night’s record close. The S&P 500 gave up 23 points or 0.51 per cent. The tech-heavy Nasdaq Composite finished flat.

A generally positive quarterly earnings season produced more losers than winners overnight. Advances of 4.21 per cent for Microsoft and 4.96 per cent for Google parent company Alphabet were offset by declines in General Motors, Visa, Boeing, Twitter, Robinhood, Texas Instruments and Capital One Financial.  

A sharp retreat in treasury yields kept a floor under growth stocks. The yield on ten-year US bonds dived almost seven points towards a two-week low. Yields have declined for four sessions since last week’s four-month peak.

“The growthy names will get a boost not just from some of the earnings stuff but because interest rates are lower,” Megan Horneman, director of portfolio strategy at Verdence Capital Advisors, told Reuters.

“Interest rates are temporarily lower because of the fact that there is some uncertainty from the tax perspective and what that might do. We do know the Fed is going to taper, that has pretty much been priced in but now you have a lot of talk about what the future of the Federal Reserve may look like.”

The Federal Reserve meets next week and is expected to announce plans to reduce support for the economy. Rate-sensitive financials wilted overnight with interest rates.

Australian outlook

The ASX’s two-week rally faces its first serious test after US stocks fell away in late trade for a second session. Investors have enjoyed an armchair ride this month, with the S&P/ASX 200 gliding effortlessly higher, day after day, since the middle of the month. The domestic volatility index touched a six-week low yesterday.

While Wall Street finished mixed, there was significant weakness in the sectors that matter most here: financials -1.69 per cent and materials -1.43 per cent. The energy sector took the biggest hit, falling 2.86 per cent as crude showed the signs of profit-taking following a string of multi-year highs. China’s on-going energy crackdown reportedly triggered heavy selling in industrial metals (more below).

Australian bond yields will follow their US counterparts lower. That should in theory push funds towards proxies such as real estate, consumer staples and healthcare. However, none of those prospered overnight. US REITs shed 0.73 per cent, staples 0.52 per cent and health 0.81 per cent.

There are AGMs today for shareholders in Star Entertainment, South32, JB Hi-Fi, Corporate Travel Management, Challenger, Reece, Boral and Tassal Group.

Quarterly reports are due from mining heavyweights Fortescue Metals and Newcrest, as well as nickel producer IGO and a host of smaller companies.

The Reserve Bank‘s Deputy and Assistant Governors are due to testify today before the Senate Economics Legislation Committee. Data on quarterly import prices are due at 11.30 am AEDT.   

IPOs: two listings originally scheduled for today have been bumped into next month.

The dollar continued to rise overnight, lifting 0.15 per cent to 75.23 US cents. The Aussie has gained two and a half cents in a month.

Commodities

Industrial metals suffered heavy falls as a Chinese crackdown on coal producers weighed on prices. Thermal coal hit a 10 per cent limit down after the state planner ordered an investigation into hoarding.

Benchmark copper on the London Metal Exchange dived 2.9 per cent to US$9,667 a tonne. Aluminium tanked 5.4 per cent, nickel 3.4 per cent, lead 1.6 per cent, zinc 2.5 per cent and tin 5.5 per cent.

Aluminium fell for a sixth day in Shanghai to a two-month low. Copper fell 2.2 per cent in US trade to US$4.39 a pound.

Oil retreated from multi-year highs on news of an increase in US stockpiles last week and as traders fretted about the renewal of talks about Iran’s nuclear ambitions. The US Energy Information Administration said crude inventories increased by 4.3 million barrels last week. Iran’s chief negotiator said nuclear discussions would resume with the European Union next month, raising the possibility of increased supply if US sanctions were lifted.

West Texas Intermediate crude settled US$1.99 or 2.4 per cent below Tuesday’s seven-year closing high at US$82.66 a barrel. Brent crude fell US$1.82 or 2.1 per cent to US$84.58 a barrel.

Iron ore turned lower as Chinese curbs on steel production continued to cap any rallies. The spot price for ore landed in China fell US$3.10 or 2.5 per cent to US$119.65 a tonne. China’s steel output last month was the lowest in three years after the government imposed output limits to contain pollution ahead of the Winter Olympics.

BHP‘s US-listed stock dropped 1.99 per cent and its UK-listed stock gave up 1.29 per cent. Rio Tinto shed 2.41 per cent in the US and 1.43 per cent in the UK.

Gold rose as alternative stores of wealth, including the greenback and US treasuries, declined. Metal for December delivery settled US$5.40 or 0.3 per cent ahead at US$1,798.80 an ounce. The NYSE Arca Gold Bugs Index dipped 0.33 per cent.

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