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Aussie shares looked set to open lower following a mixed finish on Wall Street as soft jobs data muddied the economic outlook heading into a long weekend.

ASX futures declined 23 points or 0.31 per cent as the Dow fell for the fourth time in five sessions. The Nasdaq edged to a new high. The S&P 500 eased from record levels.

Gold rallied to an 11-week high. Iron ore and copper also improved. Oil retreated from its strongest level since the start of August. The dollar surged almost 1 per cent.

Wall Street

US stocks entered the Labor Day long weekend under a cloud as unexpectedly weak August jobs figures raised questions about the recovery while also signalling a possible delay to central bank plans to reduce support for the economy.  

The Nasdaq Composite climbed 33 points or 0.21 per cent as investors bought pandemic-proof Big Tech and sold companies most exposed to the health of the economy. The Dow Jones Industrial Average retreated 75 points or 0.21 per cent. The S&P 500 dipped almost two points or 0.03 per cent from record levels.

The economy added just 235,000 new jobs last month, according to Labor Department figures, less than a third of the 750,000 anticipated by economists polled by Dow Jones. The miss suggested hiring slowed dramatically last month as the delta variant depressed activity in the leisure and hospitality industries.

“The number’s a big disappointment and it’s clear the Delta variant had a negative impact on the labor economy this summer,” Michael Arone, chief investment strategist at State Street Global Advisors, told Reuters.

“You can tell because leisure and hospitality didn’t add any jobs and retail actually lost jobs. Investors will conclude that perhaps this will put the [Federal Reserve] further on hold in terms of the timing of tapering. Markets may be okay with that.”

In recent weeks, the Fed had signalled a majority of board members felt the economy might be strong enough for the bank to reduce its bond-buying program before year-end. Some investors expected the bank to announce the taper this month.

“After having indicated a taper was likely in the next few months, August payrolls perhaps throws that into disarray,” Principal Global Investors’ chief strategist Seema Shah told MarketWatch.

Cruise lines and other stocks exposed to fluctuations in demand declined. Carnival fell 4.41 per cent, Royal Caribbean 4.22 per cent and Norwegian 3.38 per cent. The S&P 1500 airlines index dropped 1.46 per cent. The FAANG group of tech leaders advanced.

Tech has become bullet-proof,” Mike Mullaney, director of global market research at Boston Partners, told Reuters. “It’s the anti-COVID sector, where you want to be if you think COVID or a lack of growth is going to be an issue.”

Australian outlook

The trading week looked set for a subdued start, with volumes impacted by a US long weekend. Soft US jobs data threw a spanner in the “economic revival” narrative on Friday. While investors will welcome any taper delay, cyclical sectors look exposed to a downturn in data.

On Friday, US materials fell 0.69 per cent, industrials 0.62 per cent and energy 0.53 per cent. Financials might have been expected to welcome a jump in US lending rates, but dropped 0.58 per cent.

The increase in bond yields had a mixed impact on traditional equity alternatives. Utilities dropped 0.8 per cent, but health, consumer staples and real estate ended little changed. Tech was the only sector to record a rise of any consequence, adding 0.38 per cent.   

The prospect of a taper delay pushed the greenback lower against rivals. The Aussie surged 0.98 per cent to 74.61 US cents, touching a seven-week high.

The S&P/ASX 200 eked out a rise of 0.5 per cent last week, thanks entirely to Friday’s rally. A wobbly week saw the index rise into month-end, then fall for two sessions before Friday’s revival. The index ended the week within 110 points of its August all-time high, but has struggled over the last fortnight to gain momentum.

This week’s potential market mood-changer is tomorrow’s Reserve Bank meeting. The bank announced last month it would start to reduce support for the economy this month. The decision to taper the bond-buying program to $4 billion per week from $5 billion is now under scrutiny in light of extended lockdowns in NSW, Victoria and the ACT.

On Friday, Westpac said the bank should not only reverse the taper decision, but increase its bond purchases. The bank expects the economy to contract 4 per cent this quarter – significantly more than the “1% at least” the RBA quoted at last month’s meeting.

“A delay in the taper is unlikely to generate much market response but a decision to actually lift weekly purchases from $5 billion to $6 billion would impact markets, including bond spreads and the AUD,” the bank’s chief economist Bill Evans said.

“It would not be the size of the increase but the signal that the RBA was prepared to do more than just reverse the August decision and respond to the deteriorating outlook.”

The rest of the week’s economic data is expected to be grim and therefore has minimal capacity to surprise. ANZ releases the August job ads report today at 11.30am AEST. Tomorrow brings weekly consumer sentiment figures, as well as the AIG Services Index and RBA rate statement. RBA Deputy Governor Guy Debelle is due to address online conferences on both Wednesday and Thursday.

Dividend payouts capped market gains last week. Among those going ex-dividend this week are: Fortescue Metals, Altium, ASX and Ramsay Health Care (today); Origin Energy, Sonic Healthcare, Amcor, Iluka, IGO, Bluescope and IOOF (Tuesday); Brambles, St Barbara, Blackmores, Seek and Medibank (Wednesday); Nine Entertainment, South32 and Monadelphous (Thursday); and WiseTech and Cleanaway (Friday). 

IPOs: the recent lull in listings appears to be over. The ASX has eight companies slated to debut this week. HealthCo Healthcare and Wellness REIT is first cab off the rank at 11am today. The trust owns and manages “a portfolio of commercial health and wellness real estate assets”.

Midas Minerals lists on Tuesday, Copper Search on Thursday and five companies on Friday: Culpeo Minerals, Mt Malcolm Mines, Iris Metals, X2M Connect and Zoom2u Technologies.

Commodities

A strong rebound in iron ore boosted BHP and Rio Tinto. The spot price for ore landed in China firmed US$5.35 or 3.8 per cent to US$145.05 a tonne.

BHP‘s US-listed stock improved 1.83 per cent and its UK-listed stock gained 0.57 per cent. Rio Tinto added 0.78 per cent in the US after inching up 0.04 per cent in the UK.

An index of US gold miners hit a four-week peak as a weakening greenback helped lift the yellow metal to its highest since mid-June. Gold for December delivery settled US$22.20 or 1.2 per cent ahead at US$1,833.70 an ounce. The NYSE Arca Gold Bugs Index climbed 2.57 per cent.

Copper also caught a lift from US dollar weakness. (A weaker greenback makes dollar-denominated commodities cheaper for buyers using other currencies.) US-traded copper firmed 0.7 per cent on Comex to US$4.33 a pound, ending the week little changed.

Oil wilted under the demand implications of slowing US jobs creation. Brent crude settled 42 US cents or 0.6 per cent lower at US$72.61 a barrel.

“U.S. hiring slowdown could be a short-term drag for the demand outlook,” Edward Moya, senior market analyst at Oanda, said.

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