Index futures point to a cautious start to Australian trade despite tech-led gains on Wall Street.
Futures traders appeared unenthused by the US rally, lifting the ASX SPI200 a tepid five points or 0.1 per cent to 5373. The S&P/ASX 200 will look to break a two-session losing streak after falling 0.4 per cent yesterday as the big banks and energy stocks declined for a second day.
Overnight, the technology-focused Nasdaq turned positive for the year as “stay-at-home” winners from lockdown restrictions continued to charge ahead. The index climbed 125 points or 1.41 per cent with Facebook, Amazon and Netflix in the vanguard.
The broader S&P 500 put on 33 points or 1.15 per cent. The Dow’s posse of mostly older, traditional blue-chips trailed with a rise of 211 points or 0.89 per cent.
The Nasdaq became the first of the three major US indices to regain its losses for the year since the COVID-19 pandemic triggered a historic decline on Wall Street. The index’s recovery has been spearheaded by technology stocks whose business models have either benefited from stay at home orders or been relatively unscathed by the massive job losses that followed. Netflix, Alphabet, Microsoft, Amazon, Facebook and Apple are all up at least 15.8 per cent this quarter, according to CNBC.
The market shrugged off more bleak economic indicators. Another 3.2 million Americans lost their jobs last week, according to first-time benefits claims, pushing the total jobs lost from the pandemic beyond 33 million. Tonight’s Labor Department April employment report is expected to reveal the unemployment rate has climbed as high as 15 per cent. Two months ago, unemployment sat at 3.5 per cent, a 50-year low.
“The market rightly or wrongly is just much more focused on what that data looks like two months from now, not what that data looks like right now,” Eric Freedman, chief investment officer at US Bank Wealth Management, told Reuters.
Investors were cheered by unexpectedly strong Chinese trade data yesterday. Chinese exports surged 3.5 per cent last month as factories resumed production. The news triggered solid gains on the London Metal Exchange. Benchmark copper rallied 1.5 per cent to US$5,243.25 a tonne. Aluminium advanced 0.4 per cent, nickel 0.2 per cent, lead 0.9 per cent, zinc 1.3 per cent and tin 0.2 per cent.
A “risk-on” night saw energy and financial stocks lead the US rally in a reverse image of yesterday’s Australian action. The defensive health and consumer staples sectors both closed red.
Energy rose 2.5 per cent despite a late reversal in oil following reports that OPEC may struggle to enforce a production cap agreed last month to support prices. Brent crude settled 26 cents or 0.9 per cent lower at US$29.46 a barrel. The US benchmark eased 44 cents or 1.8 per cent to US$23.55.
A 2.1 per cent rise in the materials sector helped Australian heavyweights BHP and Rio Tinto. BHP’s US-listed stock gained 2.69 per cent and its UK-listed stock 1.94 per cent. Rio Tinto added 2.9 per cent in the US and 3.37 per cent in the UK. The spot price for iron ore landed in China was steady at US$84.20 a dry ton.
Gold improved for the first time in three sessions after the US benefits data underlined the devastating impact of the pandemic. Gold for June delivery settled $37.30 or 2.2 per cent at US$1,725.80 an ounce.
The dollar caught a lift from weakness in the greenback ahead of tonight’s employment update. The Aussie surged 1.5 per cent to 64.94 US cents.
Today’s session brings a quarterly monetary policy statement from the Reserve Bank. The April non-farm employment change report and unemployment rate are tonight’s big-ticket items in the US. Also on tap: average hourly earnings and another round of quarterly earnings reports.