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Aussie shares looked set to open lower despite solid gains in the US as falling bond yields fuelled a rally in technology stocks.

The Nasdaq Composite rose more than 1.2 per cent. The S&P 500 and Dow also advanced. Oil and copper rose. Gold eased a fraction. Iron ore sagged yesterday. The dollar firmed.

The S&P/ASX 200 began the week strongly, rising 44 points or 0.66 per cent yesterday, but will start this session 20 points or 0.3 per cent lower according to futures action. 

Wall Street

Growth stocks led the US advance following a decline of five basis points in the ten-year US treasury yield to 1.67 per cent. A sharp rise in yields over the last few weeks has fuelled a jarring rotation out of growth stocks into value sectors. Overnight, the Russell 1000 Growth Index bounced 1.4 per cent, versus a 0.1 per cent dip in the Value Index.

The Nasdaq Composite rallied 162 points or 1.23 per cent. Tesla briefly soared 6 per cent before trimming its gain to 2.3 per cent after star stock picker Cathie Wood set a price target four times the company’s current valuation. Apple, Microsoft and Netflix all put on at least 2 per cent.  

The S&P 500 added 27 points or 0.7 per cent. The Dow Jones Industrial Average put on 103 points or 0.32 per cent.

“The market is trying to digest what’s going on in the bond market,” Jake Wujastyk, chief market analyst at TrendSpider, told Reuters. “The technology stocks are pretty beaten down and it’s not shocking to see those rebounding a little bit from their lows.”

Travel and tourism stocks retreated after several European countries reintroduced lockdowns to contain a third wave of Covid-19. France, Germany and Italy were among countries to extend or announce fresh measures in recent days. The S&P 1500 Airlines Index dropped 3.4 per cent. Cruise companies Carnival and Norwegian shed 5.1 and 3.5 per cent, respectively. Hotel groups also declined.

Rate-sensitive financials declined 1.3 per cent. Rising interest rates allow lenders greater opportunities to increase margins. JPMorgan Chase and Goldman Sachs were among the biggest drags on the Dow.

Select industrials got a leg-up from reports President Joe Biden plans to spend as much as US$3 trillion on infrastructure to fuel the recovery. The reported figure was 50 per cent higher than most Wall Street estimates. Heavy machinery manufacturer Caterpillar climbed 0.3 per cent.

Australian outlook

The S&P/ASX 200 pre-empted a strong start to the week in the US and looks set to give a little back this morning. Where the market goes from there will depend to some extent on bulk metals. Iron ore, the nation’s most valuable export, slid to a six-week low yesterday after China tightened pollution controls. That was enough to send Fortescue Metals down more than 4 per cent to its weakest level since December. New addition to the index, Champion Iron, skidded more than 10 per cent.

The banks may also come under pressure as rates decline. The Australian ten-year yield dropped four basis points yesterday and may have made a short-term top.

“We’re probably close to the top of this move in yields,” ThinkMarkets analyst Carl Capolingua said. “We’re in the camp with most analysts who believe that that this is a necessary short-term adjustment, and that we’ll eventually grow more comfortable with where long-term rates have settled. They’re still going to be very low historically, and certainly low enough to keep the global recovery going, especially when you consider all of the fiscal stimulus out there.”

The US energy sector shed 1 per cent despite a skinny gain in oil.

Bright spots? US tech jumped 1.9 per cent, consumer staples 1.1 per cent and REITs 1.1 per cent.

The dollar climbed 0.32 per cent to 77.47 US cents.

Commodities

Iron ore slumped to its weakest level in six weeks amid signs China wants to reduce steel output for environmental reasons. The spot price for ore landed in China declined $3.85 or 2.4 per cent to US$156.35 a tonne. Futures on the Dalian Commodity Exchange tumbled 5.9 per cent.

Damage to the big two ore exporters was limited in overseas trade. Rio Tinto gave up 0.61 per cent in the US and 1.55 per cent in the UK. BHP’s UK-listed stock fell 0.36 per cent, but its US-listed stock gained 0.51 per cent.

Oil mounted a tepid rebound from its worst week since October. Brent crude settled nine cents or 0.1 per cent higher at US$64.62 a barrel.

Gold slipped, with some commentators attributing the weakness to currency turmoil in Turkey, a major buyer. Metal for April delivery settled $3.60 or 0.2 per cent lower at US$1,738.10 an ounce. The NYSE Arca Gold Bugs Index retreated 1.25 per cent.

Copper climbed 0.6 per cent to US$4.14 a pound.

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