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The share market’s four-session winning run is under threat following a sharp downturn on Wall Street after soft consumer confidence data undermined the outlook for corporate profits.

ASX futures slumped 84 points or 1.26 per cent, signalling pressure on a recovery that has lifted the benchmark 5.6 per cent from last week’s low.

Advances in iron ore and crude oil may cushion the market from a deeper loss after the S&P 500 dived 2 per cent. Gold and most base metals lost ground. The dollar remained just above 69 US cents.

Wall Street

The latest bear market rally rolled over as weak economic data sharpened fears the economy is heading into recession. Stocks failed to sustain opening gains, closing at session lows.  

The S&P 500 declined 79 points or 2.01 per cent. The Dow Jones Industrial Average gave back 491 points or 1.56 per cent. The Nasdaq Composite shed 343 points or 2.98 per cent.

A 16-month low in consumer confidence exacerbated worries about next month’s Q2 corporate reporting season. The Conference Board’s confidence index dropped to 98.7 from a revised 103.2 in May as Americans fretted about soaring fuel and food prices. Economists polled by Dow Jones expected a smaller decline to 100.

Tom Hainlin, national investment strategist at US Bank Wealth Management, said the market was “wondering whether declining consumer confidence will translate into recession and we haven’t resolved that question. We haven’t seen second quarter earnings reports, so we don’t know if companies are seeing a slowdown.”

Adding to concerns, the report showed expectations for inflation continued to deteriorate. Inflation expectations rose to 8 per cent this month from 7.5 per cent in May.

“The persistent weakness in confidence surveys suggests a recessionary environment can become self-fulfilling,” John Lynch, chief investment officer at Comerica Wealth Management, said.

A regional measure of manufacturing activity fell to its lowest since May 2020. The Richmond Fed Manufacturing Index sank to -19.

Retailers wilted after the consumer confidence data. Home Depot dropped 4.44 per cent, Macy’s 4.06 per cent and Bed Bath & Beyond 3.26 per cent. Nike skidded 6.99 per cent as a cautious revenue outlook overshadowed better-than-expected earnings.

Casino operators and US-listed Chinese companies rose after China relaxed Covid rules for inbound travellers. Compulsory quarantine will half to 10 days from 21 days.

Market heavyweights Apple, Amazon and Microsoft were the biggest drags, losing at least 2.98 per cent.

Two sessions out from the end of the first half, the S&P 500 is on track for its worst start to a year since 1970. All three of the major indices are set to log back-to-back quarterly declines for the first time since 2015.

Australian outlook

Batten the hatches, we’re going down. Wall Street sank like a stone overnight, resuming the heavy selling that has characterised much of this year’s trading.

The S&P/ASX 200 has made the most of a temporary respite in the bloodletting, bouncing 5.6 per cent since last Monday’s 19-month low. That gives the index a handy cushion before this year’s lows come back into play.  

The looming end of the financial year and a rebound in some commodity prices should provide a safety net today. BHP and Rio Tinto rose against the trend in overseas trade (more below).

Energy was Wall Street’s only sector winner, rising 2.7 per cent as crude advanced for a third session. Utilities was best of the rest with a fall of 0.36 per cent.

The three sectors dominated by ‘Big Tech’ led the sell-off, losing between 2.9 and 4 per cent. Materials dropped 1.07 per cent. Financials coughed up 0.93 per cent.

Back home, retail sales figures are due at 11.30 am AEST.

Toll road operator Transurban and more than a dozen REITs go ex-dividend today. Among those to trade without the right to the next distribution are Goodman Group, Dexus, Stockland and Mirvac.

The dollar dipped 0.19 per cent to 69.07 US cents.

Commodities

Oil climbed for a third night ahead of today’s OPEC+ monthly meeting. Buyers were encouraged by civil unrest in major producers Ecuador and Libya, and by doubts over OPEC’s capacity to increase output.  

Brent crude settled US$2.89 or 2.5 per cent ahead at US$117.98 a barrel. The US benchmark climbed 2 per cent to US$111.76.

Iron ore climbed to its highest in a week as Beijing and Shanghai reported no new Covid cases. The Chinese government halved quarantine time for inbound travellers.

The most-traded ore contract on the Dalian Commodity Exchange jumped 6.3 per cent to US$120.99 a tonne. The spot price for ore landed at Tianjin firmed 60 US cents or 0.5 per cent to US$130.28 a tonne.

BHP‘s UK-listed stock rallied 1.57 per cent. The miner’s US-traded depositary receipts added 0.88 per cent. Rio Tinto put on 0.38 per cent in the US and 1.96 per cent in the UK.

Gold logged its weakest close in almost two weeks, but remained within its recent trading range. Metal for August delivery settled US$3.60 or 0.2 per cent lower at US$1,821.10 an ounce. The NYSE Arca Gold Bugs Index slid 2.68 per cent.

The price of gold has been stuck between US$1,800 and US$1,880 since mid-May.

“Gold has been caught within an increasingly narrower range as it toys between risk of faster rate hikes, and prolonged elevated inflation and slower growth,” Suki Cooper, executive director of precious metals research at Standard Chartered, told MarketWatch.

An initial rally in copper on China’s quarantine changes ran out of steam as risk appetite dried up. Benchmark copper on the London Metal Exchange settled 0.7 per cent lower at US$8,360 a tonne. Aluminium gave up 0.1 per cent, lead 2.1 per cent and tin 0.9 per cent. Nickel improved 1.2 per cent and zinc 0.2 per cent.

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