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A dour finish on Wall Street points to mild early pressure on Australian stocks ahead of August employment data.
ASX SPI200 index futures eased 13 points or 0.2 per cent as US stocks closed mixed but well off session highs after the Federal Reserve warned the road to recovery remained highly uncertain despite record stimulus spending.
Oil jumped more than 4 per cent as a hurricane halted production in parts of the Gulf of Mexico. Gold rose for a third night. Iron ore slumped more than 3 per cent.
Wall Street
This month’s tech sell-off resumed after the Fed kept its key rate at a record low and released projections indicating it expects to keep it there until at least 2023. Economic forecasts from the Open Market Committee were revised upwards, but Chair Jerome Powell warned the current recession was “the most severe in our lifetime”.
“Overall activity remains well below its level before the pandemic and the path ahead remains highly uncertain,” he said.
He reaffirmed the central bank’s commitment to use “our full range of tools to support the economy in this challenging time” and called on the federal government to do more to support the recovery.
The S&P 500 initially rose as Powell spoke, then faded to a loss of 16 points or 0.46 per cent. The Nasdaq struggled all night and sold off sharply in the final hour. The tech-heavy index lost 140 points or 1.25 per cent as Apple, Facebook, Amazon, Netflix, Alphabet and Microsoft all declined.
The Dow gave up more than 300 points in late trade to finish with a gain of 37 points or 0.13 per cent. Gains in ‘old school’ stocks such as Chevron, Boeing and McDonald’s helped offset declines in the tech giants.
Australian outlook
The late sell-off in the US throws a spanner in what looked like a promising recovery this week from ten-week lows. The S&P/ASX 200 rallied 63 points or 1 per cent yesterday to its highest level in a week.
Wall Street has been dictating the market direction here for the last two weeks, but domestic matters may get a say this session when the Australian Bureau of Statistics releases the August jobs report at 11.30 am EST. These figures are wildly unpredictable at the best of times, even more so in these extreme circumstances with government payments and the fluid situation in Victoria distorting the data. The consensus among economists is that headline employment fell by 40,000, lifting the jobless rate from 7.5 per cent to 7.7 per cent.
The US energy sector was a clear winner, surging 4 per cent. The financials and industrials sectors also fared well, rising at least 1 per cent. The two sectors that performed best here yesterday – technology and communications – finished last in the US, falling 1.6 and 1.2 per cent, respectively.
Commodities
Oil was the standout after US inventories declined more than expected and Hurricane Sally stopped almost a third of crude production in the Gulf of Mexico. Brent crude settled $1.69 or 4.2 per cent higher at US$42.22 a barrel. The US benchmark climbed 4.9 per cent.
Iron ore miners finished mixed despite a sharp retrace in ore. The spot price for ore landed in China dropped $4.25 or 3.3 per cent to US$124.30 a dry ton. BHP’s US-listed stock gained 0.87 per cent and its UK-listed stock 0.74 per cent. Rio Tinto shed 0.9 per cent in the US and 1.66 per cent in the UK.
Gold edged higher for a third night. Metal for December delivery settled $4.30 or 0.2 per cent ahead at US$1,970.50 an ounce.
Zinc was the pick of the industrial metals on the London Metal Exchange, rising 1.3 per cent back towards this month’s 16-month high. The metal used in steel production has been boosted by strong Chinese demand. Copper added 0.2 per cent, aluminium 0.3 per cent, nickel 0.2 per cent and tin 0.4 per cent. Lead gave up 0.7 per cent.
The dollar got a lift from a post-Fed dive in the greenback, rising 0.15 per cent to 73.06 US cents.
