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The share market was set to open little changed with almost half the country in lockdown and a dive in the dollar helping to offset falls on Wall Street.
Declines in growth stocks outweighed slender gains in cyclicals during a mixed night in the US. The S&P 500 and Nasdaq retreated despite another round of positive corporate earnings. The Dow inched up less than 0.2 per cent.
ASX futures dipped six points or 0.08 per cent, signalling a downbeat start following yesterday’s 19-point loss on the S&P/ASX 200. The market faded yesterday as news of a snap five-day lockdown in Victoria overshadowed strong jobs data.
Overnight, the dollar slumped more than half a cent. Iron ore jumped 2 per cent. Oil fell almost 2 per cent. Gold rose for a third session.
Wall Street
US stocks finished broadly lower as a drop in jobless claims and more upbeat earnings failed to inspire buyers, sharpening fears that much of the recovery is priced in. The S&P 500 has put on 16 per cent so far this year in anticipation of a strong revival in corporate earnings as the economy rebounds.
The S&P 500 sank 14 points or 0.33 per cent. The Nasdaq Composite fell 102 points or 0.7 per cent as growth stocks led the sell-off. The Dow Jones Industrial Average inched up 54 points or 0.15 per cent.
Cyclical stocks narrowly outperformed after first-time claims for unemployment benefits fell to a pandemic-era low. Initial filings declined by 26,000 last week to 360,000, the lowest tally since the second week of March last year. Continuing claims dropped by 126,000 to 3.24 million, also a pandemic-era low.
A much-anticipated quarterly reporting season has so far been met with more of a shrug than fireworks. Overnight, Morgan Stanley inched up 0.18 per cent despite beating analysts’ earnings expectations. CNBC analysis indicates 18 S&P 500 companies have beaten earnings expectations by an average of 18 per cent this week, but share prices have fallen an average of 0.58 per cent after reporting.
Trade in other banks that reported strong results this week was subdued. Wells Fargo added 0.11 per cent, JPMorgan Chase 0.22 per cent and Citigroup 0.41 per cent. Bank of America dipped 0.08 per cent and Goldman Sachs 0.28 per cent.
“The market did as well as it did in the past year because it was in anticipation of the improvement in earnings that we’re seeing right now,” Liz Ann Sonders, chief investment strategist at Charles Schwab, told CNBC. “A lot of news has been priced in.”
Big Tech has outperformed this week, but retreated overnight even as bond yields continued to fade. Apple, Amazon, Alphabet, Microsoft and Facebook all declined, pulling the S&P 500 tech sector to its first loss in five sessions.
Australian outlook
An uninspiring outlook, with weak US leads compounding the deteriorating domestic situation. Damage to the major indices was minimal, but the US has certainly lost momentum. A Q2 earnings season that was tipped to fuel another up-leg on global equity markets has yet to ignite.
Lockdown-weary Victorians are waking up to their fifth shutdown after the state went from zero cases three days ago to 18 yesterday. With Greater Sydney facing at least two more weeks of lockdown, roughly 40 per cent of the country is now in the economic deep freeze.
The S&P/ASX 200 eased 19 points or 0.26 per cent yesterday after the ABC reported a Victorian lockdown was imminent. The news overshadowed another extraordinarily strong jobs report. The unemployment rate fell two basis points last month to 4.9 per cent, its lowest level since December 2010.
The fast-changing Covid situation seems to have thrown a brake on the rush of IPOs over the last few months. Few of the companies on the starting grid on Monday seem to have got away. Most listings have been pushed into next week. BCAL Diagnostics, tentatively pencilled in for today, is now scheduled for next Wednesday.
Bond proxies fared best in the US as yields dropped almost five basis points. Utilities gained 1.1 per cent, consumer staples 0.42 per cent and real estate 0.14 per cent. Gains in regional banks helped the financial sector edge up 0.38 per cent. Materials finished barely changed, up 0.04 per cent.
Energy stocks dived 1.41 per cent as crude reacted to a rise in US inventories. The tech sector sank 0.84 per cent.
A slide in the dollar should offer exporters and US-facing businesses some support. The Aussie dropped 0.73 per cent to 74.26 US cents.
Commodities
Oil declined as traders fretted about a rise in US stockpiles, reports of a Saudi-UAE deal to increase production and the demand implications of the spread of delta Covid variant. Brent crude settled $1.29 or 1.7 per cent lower at US$73.47 a barrel, its lowest finish since July 7.
Iron ore was lifted by declines in Chinese steel inventories, indicating improving demand. The spot price for ore landed in China rose US$4.45 or 2 per cent to US$222.30 a tonne.
BHP’s US-listed stock rose 0.38 per cent and its UK-listed stock gained 0.13 per cent. Rio Tinto put on 0.61 per cent in the US and 0.89 per cent in the UK.
Gold reversed losses to rise for a third session. Metal for August delivery settled $4 or 0.2 per cent higher at US$1,829 an ounce. The NYSE Arca Gold Bugs Index gained 0.76 per cent.
Industrial metals were boosted by speculation yesterday’s soft Chinese economic data might prompt further monetary loosening. Benchmark copper on the London Metal Exchange bounced 1.6 per cent to US$9,452 a tonne. Nickel gained 1 per cent, lead 1.4 per cent, zinc 1.6 per cent and tin 0.5 per cent. Aluminium dipped 0.3 per cent.
