Join our daily newsletter At The Bell to receive exclusive market insights
Futures action points to a second day of tentative ASX gains after tech stocks steered the S&P 500 and Nasdaq to new records.
Australian futures advanced 17 points or 0.23 per cent. The S&P/ASX 200 yesterday logged its first rise in three sessions, gaining 16 points or 0.22 per cent.
Iron ore and gold turned lower overnight. Oil and copper added to last week’s rallies. Aluminium hit a 13-year high in Chinese trade. The dollar dipped below 73 US cents.
Wall Street
US stocks finished mixed but broadly higher, with sector rotations reflecting movements on bond markets in the wake of Friday’s speech by Federal Reserve Chair Jerome Powell. A decline in yields on long-term US treasuries boosted high-growth stocks while depressing lenders.
The growth-stock-heavy Nasdaq Composite rallied 136 points or 0.9 per cent to a new closing high. The S&P 500 – a mix of growth and cyclical stocks – put on 19 points or 0.43 per cent. The growth-lite Dow Jones Industrial Average eased 56 points or 0.16 per cent.
The yield on ten-year US treasuries declined more than three basis points to a second straight loss since Fed Chair Powell indicated on Friday the bank was a long way from raising officials rates and in no rush to taper its bond-buying program. Lower rates benefit growth stocks whose valuations depend on the cost of borrowing to fund future earnings.
“It’s now clear that there’s going to still be an extraordinary amount of support for this economy, probably until November,” Ed Moya, senior market analyst for the Americas at Oanda, said.
“Some investors are thinking that tapering might not even start this year, but the one thing that everyone can agree on is that Chair Powell has signalled they are in no rush to raise interest rates and he’s disconnected tapering with rate-hike timing.”
The FAANG group of tech leaders set the pace. Facebook and Amazon gained 2.15 per cent, Apple 3.04 per cent, Netflix 1.3 per cent and Google parent company Alphabet 0.41 per cent. Microsoft added 1.29 per cent.
The financial sector, which suffers from tightening margins at lower rates, declined 1.47 per cent. Wells Fargo dropped 2.81 per cent, Bank of America 1.95 per cent, JPMorgan Chase 1.6 per cent and Goldman Sachs 1.45 per cent.
Pending home sales contracted 1.8 per cent last month, compared to June. Economists polled by MarketWatch had predicted sales would improve 0.5 per cent. This week’s key economic release is the August jobs report on Friday night.
Australian outlook
The ASX looked set to build on last week’s tentative recovery following a broadly supportive night on equity and commodity markets. The last session of the month is often positive as investment managers put the best possible gloss on their portfolios. The S&P/ASX 200 starts the session 112 points or 1.5 per cent ahead for August and on track for an 11th straight monthly advance.
A two-speed market in the US favoured growth stocks and bond proxies over cyclicals. The best of the US sectors were real estate +1.15 per cent, technology +1.09 per cent and consumer discretionary +0.92 per cent. Health, consumer staples and utilities were also positive.
Here, the banks look likely to drag, assuming Australian yields mimic moves on US markets. US financials sank 1.47 per cent. The materials sector dipped 0.18 per cent. Energy stocks declined 1.16 per cent even as oil rose.
A busy day for economic date includes Chinese factory and services-sector updates at 11 am AEST, as well as domestic building approvals, private-sector credit and current account data at 11.30 am.
The full-year earnings season is all but done and dusted. Nickel miner IGO is one of the few majors slated to report today.
The dollar’s push above 73 US cents faltered overnight. The Aussie was lately down 0.28 per cent at 72.95 US cents.
Commodities
Oil added to last week’s double-digit rally as Hurricane Ida made landfall, closing refineries along the US Gulf Coast, as well as off-shore production facilities. Brent crude settled 71 US cents or 1 per cent ahead at US$73.41 a barrel.
“Hurricane Ida has been bad for gasoline production as the shutdowns have represented 13% of refining capacity, which could be shut down for up to a week if there is extensive flooding and power outages,” Jay Hatfield, chief executive and portfolio manager at Infrastructure Capital Advisors, wrote.
Aluminium prices soared to their highest in more than 13 years after China slapped several smelters with production caps. Shanghai aluminium futures climbed 4.2 per cent to a level last seen in August 2008 before trimming their advance to 3.9 per cent.
Copper improved 1 per cent in US trade to US$4.38 a pound. The London Metal Exchange was closed for a UK holiday.
BHP and Rio Tinto rallied in US action. BHP’s US-listed stock gained 1.64 per cent. Rio Tinto edged up 0.3 per cent. The London Stock Exchange was closed for the August bank holiday. The spot price for iron ore landed in China dropped US$1.30 or 0.8 per cent to US$157.75 a tonne.
Gold gave back some of Friday’s post-Powell-speech gains. Gold for December delivery settled US$7.30 or 0.4 per cent lower at US$1,812.20 an ounce. The NYSE Arca Gold Bugs Index shed 1.79 per cent.
