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Australian stocks were set to open higher for a fourth day after a drop in US bond yields and a rebound in cryptocurrencies helped lift Wall Street.
ASX futures rallied 20 points or 0.28 per cent as the Nasdaq Composite gained more than 1.4 per cent. The S&P 500 added almost 1 per cent.
Gains were kept in check by a sharp decline in iron ore yesterday. A softening greenback boosted other commodities overnight, including gold, crude and copper.
Wall Street
Tech stocks spearheaded a night of solid gains in the US as Bitcoin bounced 20 per cent off its weekend low, Covid cases fell to their lowest since June and treasury yields declined.
The tech -heavy Nasdaq Composite rallied 190 points or 1.41 per cent. Apple, Amazon, Microsoft, Facebook and Alphabet all gained at least 1.3 per cent.
The S&P 500 put on 41 points or 0.99 per cent. The Dow Jones Industrial Average added 186 points or 0.54 per cent.
US government bond yields fell to their lowest in two weeks after the White House trimmed its inflationary infrastructure proposal. On Friday, Democrat negotiators pared the cost of the proposed bill to US$1.7 trillion from an original US$2.25 billion in a bid to move closer to a deal with Republicans. Highly-valued growth stocks such as tech are particularly vulnerable to rising yields because of the way they are valued.
“It seems to be the continued bounce in a rotation back to growth, the top performing sectors today are all growth stocks,” Bill Stone, chief investment officer at The Glenview Trust, told Reuters. “It’s the continuing tug of war.”
Tech sentiment was also lifted by a recovery in digital coins following a volatile weekend. Bitcoin plunged as low as US$31,228 on Sunday night before roaring back overnight. The digital currency was lately up 15.48 per cent at US$38,954. Other tokens bounced up to 30 per cent.
Tesla, which has significant Bitcoin holdings, rallied 4.4 per cent. Crypto-miner Riot Blockchain rebounded 13.62 per cent. Trading platform Coinbase gained 0.42 per cent.
So-called “reopening stocks” advanced on news Covid cases in the US hit an 11-month low last week. Around 49 per cent of Americans have had at least one vaccine shot. Cruiselines jumped as a bill to allow cruises to restart in Alaska drew closer to becoming law.
Australian outlook
The ASX has adeptly climbed the “wall of worry” for the last three sessions despite an array of headwinds. Clearly, there was plenty of cash waiting on the sidelines for last week’s six-week low to enter the market. Gains have been modest but steady. That is a bullish sign for the near-term outlook.
The S&P/ASX 200 struggled up 16 points or 0.22 per cent yesterday despite a sour session for the miners after China intensified its war on commodity prices. Iron ore plunged almost 6 per cent in response (more below). US action overnight indicated minimal alarm at the latest developments: US materials rallied 0.84 per cent.
Ten of eleven US sectors advanced. Big Tech dominated: communication services +1.84 per cent, technology +1.76 per cent, consumer discretionary +1.06 per cent. Financials gained 0.47 per cent. Utilities fell 0.2 per cent.
The Australian Bureau of Statistics publishes April trade balance data at 11.30 am EST. DGL Group is due to list today, according to the ASX.
The dollar rallied against a falling greenback, rising 0.4 per cent to 77.55 US cents.
Commodities
Iron ore plunged under US$200 a tonne after China vowed a “zero tolerance” approach to market manipulation. Chinese authorities have grown increasingly shrill after the price of ore soared from around US$60 a tonne last year to above US$220 this month. The spot price for ore landed in China sank $11.85 or 5.9 per cent yesterday to US$188.25 a tonne.
BHP’s US-listed stock shed 0.42 per cent and its UK-listed stock fell 0.66 per cent. Rio Tinto edged up 0.05 per cent in the US after easing 0.03 per cent in the UK.
Oil soared after US Secretary of State Antony Blinken dampened optimism that a nuclear deal with Iran was close. Blinken said the US had yet to see if Iran was “ready and willing to make a decision to do what it has to do” for the US to lift sanctions keeping Iranian crude off the market. Brent crude settled $2.02 or 3 per cent higher at US$68.46 a barrel.
“The biggest weight on oil has been the presumed return of Iranian barrels to the market,” Phil Flynn, senior market analyst at The Price Futures Group, wrote. “Any delay on sanctions lifting on Iran would be another bullish factor in a market that may need Iranian barrels to meet demand later this year.”
Gold rose for the seventh time in eight sessions, boosted by falling treasury yields and a weaker greenback. Gold for June delivery settled $7.80 or 0.4 per cent ahead at US$1,884.50 an ounce. The NYSE Arca Gold Bugs Index inched up 0.38 per cent.
Copper shrugged off the latest Chinese attempt to suppress prices. Benchmark copper on the London Metal Exchange advanced 0.6 per cent to US$9,928.80 a tonne. Aluminium gained 0.7 per cent and nickel 1.9 per cent. Lead shed 3.1 per cent, zinc 0.8 per cent and tin 2 per cent.
