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A futures rally promises relief for frazzled investors after three days of heavy falls.

US stocks bounced overnight as a drop in claims for unemployment benefits soothed concerns about the economic outlook.

ASX futures rallied 47 points or 0.67 per cent, signalling a positive start after inflation fears stripped 190 points or almost 2.7 per cent off the S&P/ASX 200 in three sessions.

Wall Street

A relief rally lifted Wall Street’s major indices 0.7-1.3 per cent overnight. The S&P 500 bounced 49 points or 1.22 per cent, reclaiming more than half of Wednesday’s fall. The Dow Jones Industrial Average climbed 434 points or 1.29 per cent. The Nasdaq Composite gained 93 points or 0.72 per cent.

Buyers scooped up some of the week’s biggest losers in a sign the “buy the dip” mentality remained intact following Wall Street’s worst session in months. Apple gained 1.79 per cent, Microsoft 1.69 per cent, Alphabet 1.31 per cent and Facebook 0.9 per cent.   

“This bull market ultimately has further to run,” Keith Lerner, chief market strategist at Truist, said. “Investors who are underweight equities should look to average into the market weakness and become more aggressive.”

US markets tanked on Wednesday night after consumer price data confirmed a sharp acceleration in inflation last month. The Dow dived 680 points to its heaviest loss since January. The S&P 500 fell 2.14 per cent to extend its three-day fall beyond 4 per cent.

The tech sector bounced 1.37 per cent as falls in key commodities and a retreat in bond yields soothed concerns about inflation.  Tech stocks have borne the brunt of this week’s sell-off – the Nasdaq Composite closed 8 per cent below its April high on Wednesday.

Worries about last month’s grim jobs report were partly allayed by a larger-than-expected decline in claims for jobless benefits. First-time claims fell to a seasonally-adjusted 473,000 last week from 507,000 the week before. Economists surveyed by Reuters had anticipated a smaller fall to 490,000.

Reopening plays – airlines, cruise lines, etc – rallied after the Centers for Disease Control and Prevention downgraded its health guidance for fully-vaccinated Americans. The S&P 1500 airlines index jumped 2.75 per cent. Cruise line Carnival gained 1.37 per cent. Norwegian Cruise Line Holdings gained 1.26 per cent.

Australian outlook

Sweet relief looms at the end of a challenging week that brought a record close on Monday and a sharp unravelling over the next three sessions. Investors waiting for a retrace to put more cash to work have their best opportunity in several weeks.

The S&P/ASX 200 slumped 62 points or 0.88 per cent yesterday as iron ore plunged and tech stocks tanked. Miners will likely come under renewed pressure this session after the most actively traded ore contract on the Dalian Commodity Exchange finished 7.5 per cent lower. The benchmark fell as much as 9.5 per cent yesterday after surging 23 per cent since the start of the month. The US materials sector rallied 1.53 per cent overnight, but is not as dependent as the ASX on a single commodity. BHP and Rio Tinto fell in overseas trade (more below).

The domestic tech sector skidded 4.7 per cent yesterday and looks ripe for a short-term rebound after falling more than 17 per cent since the start of the month. A decline in Australian bond yields this session would cement a platform.

Industrials and financials led in the US: industrials gained 1.9 per cent, financials 1.87 per cent. Energy was the only sector to retreat, falling 1.35 per cent as the reopening of a US pipeline sent crude down 3.3 per cent (more below).

Today’s IPOs: Pathology firm Australian Clinical Labs and miner Juno Minerals are scheduled to list, according to ASX data.

The dollar dipped 0.09 per cent 77.25 to US cents.

Commodities

A sharp retreat in iron ore (details above) and declines in industrial metals pulled BHP and Rio Tinto lower in overseas action. BHP’s US-listed stock sank 1.75 per cent and its UK-listed stock lost 3.97 per cent. Rio Tinto gave up 2.94 per cent in the US and 4.12 per cent in the UK.

Oil swooned after the Colonial Pipeline in the US reopened after the operator reportedly paid a ransom. Brent crude settled $2.27 or 3.3 per cent lower at US$67.05 a barrel. Colonial was forced to close down the pipeline servicing much of the east coast following a ransomware attack.

Gold touched its lowest level of the week before rebounding to close modestly higher. Gold for June delivery settled $1.20 or 0.1 per cent ahead at US$1,824 an ounce. The yellow metal fell as low as US$1,808.40. The NYSE Arca Gold Bugs Index closed unchanged.

Industrial metals declined after strong US inflation boosted the dollar, depressing buying interest among holders of other currencies. Benchmark copper on the London Metal Exchange eased 1.1 per cent to US$10,327.25 a tonne. Aluminium dropped 1.1 per cent, nickel 2.7 per cent, lead 1.6 per cent, zinc 1.7 per cent and tin 3.1 per cent.

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