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A mixed finish on Wall Street and a rise in the dollar point to a soft start to Australian trade following yesterday’s four-week closing high.

ASX futures eased 10 points or 0.14 per cent as the Nasdaq fell and the Dow and S&P 500 eked out slender gains.

Gold recorded its highest finish in almost a month. Oil skidded more than 2 per cent. Iron ore was steady. The dollar rallied more than 0.5 per cent.

Wall Street

US stocks closed mixed as investors weighed further evidence of inflationary pressures against soothing commentary from the Federal Reserve. Corporate earnings continued to beat expectations, but run into selling.

The S&P 500 hit an intraday record before trimming its gain to five points or 0.12 per cent. The Dow Jones Industrial Average, which was up as much as 180 points in early action, finished 44 points or 0.13 per cent ahead. The Nasdaq Composite shed 33 points or 0.22 per cent.

Wholesale prices increased at a record pace last month, exacerbating concerns about soaring inflation. The producer price index increased 1 per cent from the previous month and 7.3 per cent year-on-year. Economists had expected a month-on-month reading nearer 0.6 per cent. The report came a day after data showing the largest increase in core consumer prices in 30 years.

The data’s impact was blunted by dovish commentary from the head of the Federal Reserve. Chair Powell assured a congressional hearing this year’s jump in inflation would be temporary. Bond yields declined as Powell promised “powerful support” for the economy and insisted the bank could afford to wait before reducing its inflationary bond-buying program.

“It would be a mistake to act prematurely,” he said.

If inflationary pressures proved stronger and longer lasting than the bank expected, “we will use our tools to guide inflation back down,” he added.  

The second-quarter corporate earnings season continued, but has yet to add fuel to a rally that has lifted the S&P 500 16 per cent this year. CNBC said all 12 of the S&P 500 companies that have reported so far have beaten earnings estimates, but share prices have declined by an average 0.56 per cent after reporting.

Overnight, Bank of America fell 2.51 per cent and Citigroup eased 0.29 per cent. Wells Fargo gained 3.98 per cent.

Apple, which has yet to report, was the night’s standout. The tech giant’s shares climbed 2.41 per cent to a new high following reports it had asked suppliers increase iPhone production by 20 per cent.

Australian outlook

No red flags for the day ahead, but a somewhat soggy outlook. There was a lot of activity in the US overnight, but the overall outcome was underwhelming. News reports suggesting Victoria was considering a three-day lockdown adds another headwind for local trade, if confirmed today.

The night’s best sector gains had a defensive bias. Money flowed back into bond proxies as yields declined. Consumer staples gained 0.92 per cent, real estate 0.89 per cent and utilities 0.84 per cent.

The energy sector slumped 2.94 per cent following reports of a compromise production deal between Saudi Arabia and the United Arab Emirates. Financials slid 0.49 per cent and materials 0.19 per cent.

The S&P/ASX 200 climbed 23 points or 0.31 per cent yesterday to its highest finish since June 18. The index closed at a level where previous forays during the Greater Sydney lockdown have floundered. The index finished within half a percentage point of last month’s record close, but likely needs stronger leads to retest those levels.

Today’s mid-morning June employment report looks the best prospect for injecting some excitement into the session. The unemployment rate is expected to hold steady at 5.1 per cent on jobs growth of around 20,000. However, the data has delivered a series of positive surprises this year as the economy surged back to life. The jobless rate has fallen significantly faster than the RBA expected after peaking at 7.5 per cent last August. The May report saw a drop of four basis points from 5.5 per cent to 5.1 per cent.

Chinese GDP, factory output and retail sales figures at noon AEST also have the ability to move markets if they surprise.

IPOs: Mount Monger Resources was due to list at 12.30 pm. The gold explorer has tenements in the Mt Monger region, south of Kalgoorlie in WA.

The dollar climbed 0.61 per cent to 74.84 US cents.

Commodities

Oil sank following reports production will increase following a compromise deal between feuding Middle East producers Saudi Arabia and the UAE. The two major producers fell out earlier this month over how much the OPEC+ cartel should increase output. Brent crude settled $1.73 or 2.3 per cent lower at US$74.76 a barrel.

A falling greenback and further evidence of rising US inflation helped lift gold to its highest level since June 16. Metal for August delivery settled US$15.10 or 0.8 per cent ahead at US$1,825 an ounce. The NYSE Arca Gold Bugs Index rose 0.93 per cent.

BHP’s US-listed stock dipped 0.16 per cent after its UK-listed stock edged up 0.13 per cent. Rio Tinto put on 0.65 per cent in the US and 0.2 per cent in the UK. The spot price for iron ore landed in China finished steady at US$217.85 a tonne.

Copper dipped after Chinese imports fell for a third month. Comex-traded copper eased 0.9 per cent to US$4.27 a pound.

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