The trading week looked set for a subdued start as investors weighed record closes on Wall Street and strong gains in commodities against a rising dollar and downbeat Covid news.
The Dow and S&P 500 ended the week at all-time highs, along with iron ore and copper.
ASX futures eased four points or 0.06 per cent as the dollar touched its strongest level since late February. Over the weekend, the NSW Government extended temporary restrictions to contain a Covid outbreak. Separately, the federal government indicated the nation's borders will remain closed until next year.
US stocks finished at fresh highs as soft April jobs figures dampened fears the Federal Reserve will tighten monetary policy to stop the economy overheating. The S&P 500 rallied 31 points or 0.74 per cent. The Dow Jones Industrial Average put on 229 points or 0.66 per cent.
The Nasdaq Composite trimmed a losing week with a rise of 119 points or 0.88 per cent. The tech-heavy index lost 1.5 per cent during a week when investors favoured value stocks with better exposure to the economic recovery. The Dow gained 2.7 per cent, breaking a two-week losing streak. The S&P 500 added 1.2 per cent.
Investors found the positives in news the US economy created just 266,000 jobs last month, a little over a quarter of the one million economists expected. The jobless rate, which was expected to drop to 5.8 per cent from 6 per cent, edged up to 6.1 per cent.
Analysts struggled to explain the scale of the miss, but agreed it relieved pressure on the Fed to reduce stimulus spending and raise rates.
"One number doesn't make a trend, but it takes some of the heat off the economy overheating and inflation moving dramatically higher," Larry Adam, chief investment officer at Raymond James, told Reuters. "This puts less pressure on the Fed to prematurely talk about tapering."
Goldman Sachs chief economist Jan Hatzius said the report should be treated with scepticism, citing seasonal adjustments as a potential cause of the discrepancy between expectation and result.
“It was a huge surprise,” he told CNBC. “I think that you always have to take every data release with a grain of salt and this one I think you may have to take with a rock of salt.”
A resurgent dollar took some of the shine off an otherwise strong set of pre-weekend leads. With the greenback slumping on the US jobs miss, the Aussie surged to its highest close since late February. The currency inched up another 0.04 per cent this morning to 78.49 US cents.
A strong dollar is a plus for importers, but a negative for exporters and companies with significant overseas earnings. Dollar strength also encourages overseas equities investors to take advantage of currency gains.
Covid looms as another headwind this session. Hopes for a swift return to normal life in Greater Sydney were dashed by weekend news most temporary Covid restrictions will remain in place for another week while contact tracers seek the source of last week's breakout. No new locally-acquired cases were recorded over the weekend.
A larger problem for the travel and tourism sector was indications from the federal government the nation's borders will not reopen this year. Treasurer Josh Frydenberg said the Treasury's budget forecasts assumed borders will open next year. Prime Minister Scott Morrison said there was no "appetite" in the country to reopen yet. Qantas previously said it was working on the assumption international flights would resume in October.
Miners have strong leads: iron ore and copper hit record highs on Friday and US materials gained 0.93 per cent. The US energy sector also outperformed, rising 1.89 per cent. The financial sector tacked on 0.54 per cent. Tech stocks bounced 0.78 per cent.
More details about tomorrow night's Federal Budget emerged over the weekend. The government remains in spending mode to keep the wheels of the economy spinning. Engineering and construction companies are potential winners from $10 billion in infrastructure spending announced yesterday.
Commonwealth Bank releases a third-quarter update on Wednesday. Other companies releasing earnings this week include CSR, Xero, Orica and Pendal. Virtual AGMs will be held for GPT Group, Graincorp, Sigma Health and Unibail-Rodamco-Westfield.
Three of the heavily-weighted banks are set to trade without their dividends this week. ANZ, NAB and Westpac all go ex-dividend following last week's interim earning updates.
The economic calendar brings retail sales and business confidence reports today and weekly consumer sentiment on Wednesday
A busy schedule for IPOs looks like this at present (last-minute changes are commonplace): recruitment firm Hiremii (Tuesday); miner Australasian Gold, energy tech firm EP&T Global (Wednesday); and pathology firm Australian Clinical Labs, headphone manufacturer Audeara Limited and miner Juno Minerals (Friday).
Iron ore flew up 5 per cent to a fresh peak as China's decision to sever a key line of communication with Australia spurred panic buying. The spot price for ore landed in China rallied $10.10 to US$212.75 a tonne. Over the week, iron ore charged up $26.30 or 14.1 per cent.
Analysts suggested buyers feared China's latest diplomatic salvo was a prelude to halting Australian ore imports.
“As we’ve seen on many occasions recently, Dalian Commodity Exchange retail investors are misinterpreting, misdiagnosing and jumping to conclusions based on a political event,” Navigate Commodities managing director Atilla Widnell told the South China Morning Post. “The fact of the matter remains that Australia and China are codependent on one another when it comes to the bilateral trade of iron ore.”
Copper also hit all-time highs as speculators took advantage of tight supply. Benchmark copper on the London Metal Exchange climbed 3.2 per cent to US$10,420 a tonne. Aluminium added 1.6 per cent, nickel 0.8 per cent, lead 0.8 per cent and zinc 2.5 per cent. Tin dropped 3.3 per cent.
"We're in uncharted territory right now and the market is a bit frothy. The industrial players are in panic mode since there's not much supply," Gianclaudio Torlizzi, partner at Milan consultancy T-Commodity, told Reuters.
BHP's US-listed stock rallied 1.29 per cent and its UK-listed stock gained 1.02 per cent. Rio Tinto advanced 1.98 per cent in the US and 0.9 per cent in the UK.
Gold logged its highest finish in almost three months. Gold for June delivery settled $15.60 or 0.9 per cent ahead at US$1,831.30 an ounce. The NYSE Arca Gold Bugs Index climbed 1.77 per cent.
The tumbling greenback helped oil inch higher. Brent crude settled 19 cents or 0.3 per cent ahead at US$68.28 a barrel.