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A lacklustre night on Wall Street points to a muted start to Australian trade as inflation worries lingered and key commodities mostly declined.

US stocks finished mixed, but little changed. Iron ore, oil and copper retreated. Gold inched higher.  

ASX futures edged up five points or 0.07 per cent. The S&P/ASX 200 ended yesterday’s session 13.5 points or 0.19 per cent lower, its first loss in four sessions.

Wall Street

Without fresh catalysts to provide direction, Wall Street replayed Friday’s key theme: a gentle rotation from value stocks back to growth stocks to reflect lower bond yields. The Russell 1000 Growth Index gained 0.33 per cent overnight. The Value Index fell 0.3 per cent.

The growth stock-heavy Nasdaq Composite rallied 67 points or 0.49 per cent. The value-heavy Dow Jones Industrial Average fell 126 points or 0.36 per cent. The most balanced of the three, the S&P 500, eased three points or 0.08 per cent.

“Thematically, we’re done with earnings, so you have this lull in between earnings when what drives the market is economic data points,” Joseph Sroka, chief investment officer at NovaPoint, told Reuters. “There’s not a lot of impetus for investors to take action today.”

The overnight action continued Friday’s rotation after unexpectedly soft May jobs growth soothed fears the US economy was overheating, easing pressure on the Federal Reserve to tighten monetary policy. Cyclical stocks fell. Borrowing-dependent growth stocks rallied as the yield on ten-year US treasuries dived.

“There’s been this flip-flop between whether inflation will be transitory or persistent, and the next card that gets flipped over for that is the CPI [consumer price index] report on Thursday,” Sroka said.

Despite the setbacks, the major indices remained within touching distance of record levels. The S&P 500 finished around 0.3 per cent from last month’s intraday high. The index has put on more than 12 per cent this year.

Most of the night’s excitement happened further down the food chain with the “meme stocks” favoured by the Reddit army of retail traders. AMC Entertainment climbed 14.8 per cent, adding to last week’s 85 per cent rally. GameStop put on 12.74 per cent. BlackBerry added 13.78 per cent.

Investors awaited further news on a global corporate tax rate and on President Joe Biden’s infrastructure spending package. House Democrats were expected to present a bill for a vote as soon as tomorrow night.

Australian outlook

The local market took a breather yesterday after briefly touching a fourth straight record high. Investors may have to wait a little longer for further gains, given the tone of US trade overnight.

Cyclical stocks led the US selling after Friday’s jobs figures sapped enthusiasm for the “red hot economy” theme. The two sectors with the biggest weighting on the S&P/ASX 200 – materials and financials – fell 1.23 per cent and 0.63 per cent. BHP and Rio Tinto declined in US and European trade.

The best of the US sectors were traditional bond proxies: real estate +0.91 per cent and communication services +0.48 per cent. Healthcare rose 0.33 per cent after US regulators approved Biogen’s Alzheimer’s treatment.

The ASX appeared to react negatively to yesterday’s Victorian Covid-19 numbers (a jump from 4-5 cases reported each day over the weekend to 11 new local cases yesterday). Today’s morning update may change the market mood for better or worse.

Tech stocks should gain support after takeover offers yesterday for Altium and Hansen Technologies suggested recent weakness in the sector had created value for predators.

May business confidence figures were due at 11.30 am AEST. Aurizon holds an investor day.

The dollar climbed 0.26 per cent overnight to 77.6 US cents.

Commodities

Mining giants BHP and Rio Tinto fell in overseas action as iron ore declined for a second session. The spot price for ore landed in China eased $5.50 or 2.6 per cent to US$202.85 a tonne.

BHP‘s US-listed stock dropped 1.69 per cent and its UK-listed stock shed 1.15 per cent. Rio Tinto lost 1.82 per cent in the US and 1.25 per cent in the UK.

Oil pulled back from two-year highs after Chinese data showed imports at a five-month low last month. Brent crude settled 40 cents or 0.6 per cent lower at US$71.49 a barrel.

“Crude’s rally came to a screeching halt overnight,” Edward Moya, senior market analyst at Oanda, wrote. “China’s economic recovery is moderating but is still strong when compared to the rest of the world,” he added.

Gold rose for a second session, supported by a soft US dollar and treasury yields. Metal for August delivery settled $6.80 or 0.4 per cent higher at US$1,898.80 an ounce. The NYSE Arca Gold Bugs Index closed flat.

Copper declined after Chinese exports grew at a slower rate last month. Copper traded on Comex eased 0.1 per cent to US$4.53 a pound.

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