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Australian stocks looked set for early gains despite a fourth straight fall on the Dow as US investors weighed a pandemic low in jobless claims against taper worries.
ASX futures bounced 25 points or 0.34 per cent, signalling an early rebound from the market’s worst decline in more than six months. The S&P/ASX 200 collapsed 142.5 points or 1.9 per cent yesterday as US equity futures deteriorated.
A mixed session on commodity markets overnight saw iron ore fall to an 11-month low and aluminium set a 13-year high. Oil retreated. Gold edged above US$1,800 an ounce.
Wall Street
US stocks fell overnight, but declines were mitigated by tentative buying of cyclical stocks after a sharp drop in claims for benefits soothed concerns about slowing economic growth.
The Dow Jones Industrial Average sagged 152 points or 0.43 per cent to a fourth straight loss. The S&P 500 gave up 21 points or 0.46 per cent, also a fourth decline. The Nasdaq Composite shed 38 points or 0.25 per cent.
Concerns that the economy was losing momentum under the spread of the delta Covid variant were temporarily alleviated by strong unemployment data. First-time claims for benefits plunged 10 per cent last week to 310,000 from 345,000 the week before.
Claims were significantly less than the 335,000 anticipated by economists polled by Dow Jones. The tally was also the lowest of the pandemic era. First-time claims peaked at 6.1 million when the pandemic began and held above a million a week until August last year. Continuing claims declined by 200,000 last week to 2.78 million, also a pandemic low.
While the data dampened worries about the health of the economy, investors remained on edge over the prospect of the Federal Reserve reducing support. The Fed meets on September 21-22 and may outline plans to taper an emergency bond buying program that helped the economy through the pandemic.
Overnight, the European Central Bank announced it will reduce asset purchases to reflect improvements in financing conditions and rising inflation. Here, the Reserve Bank confirmed earlier this week it would pare back quantitative easing measures introduced last year to cushion the Australian economy through the pandemic downturn.
Slender gains in US cyclical sectors were outweighed by declines in bond proxies and growth stocks. Microsoft and Amazon were among the biggest weights on the benchmarks.
“The problem with the market these days is it’s rotating more than it’s moving. Today, because of the jobs claims report, everyone is buying cyclical stocks,” Jay Hatfield, chief executive of Infrastructure Capital Management, told Reuters. “We see it as a rangebound market.”
Australian outlook
Some early relief coming for investors following yesterday’s horror session. The S&P/ASX 200 appeared to anticipate a worse night on Wall Street than eventuated.
The Dow and S&P 500 fell for a fourth night, but the pace and scale of the declines did not reflect the sort of sell-off seen here.
The S&P 500 has dropped less than 1 per cent in four sessions. The ASX 200 has given up more than twice that. Tentative signs of a rebound here today reflect indications the ASX has overshot to the downside.
Financials was the pick of the US sectors with a skinny gain of 0.25 per cent. Energy and materials were also narrowly positive, up 0.12 and 0.07 per cent, respectively.
The rest of the market saw red. Defensive sectors took the biggest hit. Real estate sank 2.12 per cent, health 1.17 per cent and consumer staples 0.61 per cent.
A big week for dividend payments continues with WiseTech and Cleanaway Waste among companies trading ex-dividend.
Speculators are preparing for one of the biggest days for initial public offerings in recent memory. Four companies were set to debut today, according to ASX data: Zoom2u Technologies at 11 am AEST; Mt Malcolm Mines 11.30 am; Culpeo Minerals 1.30 pm; and X2M Connect (no launch time listed at time of writing). The listing of Iris Metals, also initially scheduled for today, has been pushed back (new date to be announced).
The dollar seems to have settled in a range between 73 and 74 US cents. The Aussie was last up 0.08 per cent at 73.67 US cents.
Commodities
Iron ore fell to an 11-month low, pressured by global growth worries and Chinese environmental restrictions on steelmakers. The spot price for ore landed in China declined US$2.55 or 1.9 per cent to US$130.50 a tonne.
BHP‘s US-listed stock shed 0.93 per cent and its UK-listed stock 1.66 per cent. Rio Tinto gave up 2.03 per cent in the US and 2.68 per cent in the UK. Both miners closed at their lowest levels since December in Australian trade yesterday.
Aluminium commanded its highest price since August 2008 on the London Metal Exchange as production curbs in China and a coup in major bauxite producer Guinea fuelled a buying frenzy. Benchmark aluminium on the LME firmed 1.9 per cent to US$2,828.75 a tonne. Copper bounced 1.5 per cent, nickel 2.5 per cent, lead 0.3 per cent, zinc 0.5 per cent and tin 4 per cent.
Gold inched higher as treasury yields softened. Gold for December delivery settled US$6.50 or 0.4 per cent ahead at US$1,800 an ounce. The NYSE Arca Gold Bugs Index shed 1.14 per cent.
Oil prices retreated after Reuters reported China plans to sell some of its strategic reserve. Brent crude settled US$1.15 or 1.6 per cent lower at US$71.45 a barrel.
“This is the first officially announced release from the strategic petroleum reserve in China ever,” Phil Flynn, senior market analyst at The Price Futures Group, said. “China has been building a reserve for many years, but it is clear that they are very concerned about tight supplies and rising prices and inflation.”
