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An end-of-quarter US rotation into battered tech stocks points to a cautiously positive start to Australian trade as a new quarter gets underway.

The Nasdaq Composite jumped more than 1.5 per cent as a spike in bond yields faded. The S&P 500 hit an all-time high, nearing 4,000 for the first time. Gold and copper rebounded. Oil and iron ore declined. The dollar dipped back under 76 US cents.

ASX futures rallied 19 points or 0.28 per cent ahead of the last session before the four-day Easter break. 

Wall Street

Big Tech led the advance as investors picked up some of the quarter’s underperformers. The Nasdaq Composite, the weakest of the three major indices in recent action, gained 201 points or 1.54 per cent. Tesla jumped 5.1 per cent. Apple, Facebook and Microsoft all gained at least 1.7 per cent.

The S&P 500 finished 14 points or 0.36 per cent ahead at 3,973 after rising as high as 3,994. The Dow Jones Industrial Average faded to a late loss of 85 points or 0.26 per cent as investors sniffed at President Joe Biden’s well-flagged infrastructure spending plans.

“Investors ‘sell the news’ of President Biden’s infrastructure plan and lean away from infrastructure beneficiaries — Energy, Materials, Industrials — and into the Tech-laden sectors that have been ‘beneficiaries’ of the pandemic,” Chris Hussey, managing director at Goldman Sachs, told CNBC. The bill “was largely in-line with expectations and is being met with indifference by stock markets that have perhaps pre-traded this spending for weeks already.”

The spending plan will cost at least US$2 trillion over eight years and will be funded by raising corporate taxes to 28 per cent and introducing measures to stop companies moving profits offshore to avoid taxation.  The money will go towards upgrading roads, repairing bridges, building homes, delivering affordable broadband, replacing diesel-fuelled public transport and creating a network of electric vehicle chargers.

The Nasdaq trailled the Dow and S&P during the quarter as investors favoured companies with more upside during the economic recovery. The Dow gained 7.8 per cent, the S&P 500 5.8 per cent and the Nasdaq 2.8 per cent. By comparison, the S&P/ASX 200 added 3.1 per cent.

Growth stocks outperformed overnight as the yield on ten-year US treasuries retreated from Tuesday’s 14-month peak. Yields were lately ahead less than one basis point at 1.73 per cent after hitting 1.77 per cent on Tuesday.

The night’s big economic release – private-sector payrolls – came in broadly in line with expectations. The private sector hired 517,000 new workers last month, according to ADP, up from 176,000 in February and close to the median estimate of 525,000. The official March government jobs report will be released during the Good Friday market holiday.

Australian outlook

Futures trading indicates a positive start to the session, but it is worth noting how unreliable a guide the SPI has proved this week. Positive starts on Monday and Tuesday quickly unwound. The market rose twice as high as yesterday’s SPI number before partly unravelling late in the session.

Yesterday’s late unwind may work to today’s advantage because it implied some of the end-of-quarter window dressing  was dismantling, meaning there may be less to give back today. Volatility is likely to be high early this session as institutional investors get their portfolios back into alignment for the new quarter.

It will be interesting to see how willing traders are to hold positions over the Easter break with Wall Street due to trade twice before we reopen. (The US takes the Good Friday holiday, but not Easter Monday.)

While Wall Street firmed overnight, much of the strength was in areas where the ASX is weaker. Tech stocks jumped 1.5 per cent, consumer discretionary (Tesla) 0.8 per cent and utilities 0.6 per cent. The twin pillars of the ASX – financials and materials – eased 0.9 and 0.5 per cent. Energy was another underperformer, falling 0.9 per cent as crude retreated ahead of tonight’s OPEC+ meeting.

The first day of the new month brings reports on manufacturing, retail sales and trade.

The dollar dropped 0.17 per cent to 75.95 US cents.

Commodities

Oil wilted under the possibility the OPEC+ cartel may increase production at this week’s virtual meeting. Brent crude settled 60 cents or 0.9 per cent lower at US$63.54 a barrel. The global benchmark eased 3.9 per cent last month, but added 23 per cent for the quarter.

Gold bounced at the end of its worst quarter since 2016. Gold for June delivery settled $29.60 or 1.8 per cent ahead at US$1,715.60 an ounce. The most active gold contract lost 9.5 per cent during the quarter, the biggest percentage decline since the last quarter of 2016, according to MarketWatch.

ASX gains for the big two miners yesterday did not translate into overseas gains. BHP’s US-listed stock declined 0.44 per cent and its UK-listed stock 0.52 per cent. Rio Tinto fell 0.3 per cent in the US and 0.5 per cent in the UK. The spot price for iron ore landed in China fell $1.80 or 1.1 per cent to US$164.75 a tonne.

Copper bounced 0.4 per cent to almost US$4 a pound. Prices rallied almost 14 per cent during the quarter.  

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