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Australian shares face early pressure after an accelerating sell-off in the US threatened the local market’s best monthly return in at least 22 years.
Index futures eased 20 points or 0.3 per cent, signalling an early retreat from yesterday’s eight-and-a-half month closing high.
A combination of stimulus measures, post-US election relief, upbeat vaccine news and low infection rates has lifted the S&P/ASX 200 index 10.2 per cent since the start of the month – the best return for a month since March 1988, according to CommSec.
Wall Street
US stocks eased further from record highs, falling for a second day as positive vaccine news was outweighed by record infection numbers and fresh restrictions.
The S&P 500 reversed course mid-session to finish 42 points or 1.16 per cent lower. The Dow Jones Industrial Average fell by the same percentage, flipping an initial rise of 147 points to a final loss of 345 points. The Nasdaq Composite shed 98 points or 0.82 per cent.
The session began promisingly with final data from Pfizer and BioNTech’s vaccine candidate showing even better efficacy than last Monday’s initial results. Final analysis showed the BNT162b2 vaccine was 95 per cent effective in preventing Covid-19, the companies said. They intend to apply for an emergency use authorisation “within days”. The final efficacy rate was similar to that of Moderna’s rival vaccine.
“The vaccine announcement has moved the conversation about a return to normal from ‘if’ to ‘when’,” Bill Callahan, investment strategist at Schroders, told CNBC. “What is most important is that the vaccine announcement removed some of the long term uncertainty, which had kept investors cautious.”
While the long-term outlook improved, news that New York City was closing its schools was a sobering reminder of the immediate challenge. The average number of new cases in the US per day hit a new record of around 157,000 on Tuesday.
Investors appeared to take the long view. Value stocks outperformed growth. Industrials, small caps and transport stocks that benefit from re-opening all performed relatively well.
Planemaker Boeing briefly jumped 4 per cent after US authorities cleared its troubled 737 Max to fly. The jet was approved to return to the skies after 20 months following major changes to design and training. Boeing shares ended 3.2 per cent lower.
Australian outlook
The local market’s willingness to ignore weakness on Wall Street faces another test today. Tuesday’s US falls were mild enough to ignore. This morning’s accelerating sell-off presents a stiffer challenge. Drunk on stimulus and fortified by superior Covid rates, this morning’s futures number implies any damage to the ASX will be minimal. The outlook here is strikingly different to the disaster unfolding across the pond.
Falls in the US ultimately broadened to include every sector. Energy was hit hardest, falling 2.9 per cent. Utilities, health and real estate all shed at least 1.7 per cent. Financials gave up 0.9 per cent and materials 0.8 per cent. Industrials got off lightest with a loss of just under 0.5 per cent.
Back home, October jobs figures are due at 11.30 am AEDT. The distorting effect of government support measures means the monthly updates have had limited impact on the market in recent months. Today’s report is expected to show a modest uptick in the jobless rate from 6.9 to 7.1 per cent.
AGM season continues with meetings at Goodman Group, Bluescope Steel, SEEK, Altium, Mirvac, Virtus Health and FlexiGroup.
The dollar caught an uplift from a fall in the greenback. The Aussie rose per 0.1 cent to 73.04 US cents.
Commodities
Buying interest in Australia’s iron ore majors flared briefly during the European session, then faded. BHP’s US-listed stock dropped 0.74 per cent after its UK-listed stock gained 0.71 per cent. Rio Tinto shed 0.28 per cent in the US after adding 1.06 per cent in the UK. The spot price for ore landed in China climbed $1.10 or 0.9 per cent to US$127.25 a tonne.
Oil stocks declined even as crude reached its highest level since early September. Brent crude settled 59 cents or 1.4 per cent ahead at US$44.34 a barrel. Chevron was among the biggest drags on the Dow, falling 3.2 per cent.
Gold stocks took a hit from the metal’s first back-to-back decline in three weeks. The NYSE Arca Gold Bugs Index retreated 3.6 per cent. Gold for December delivery settled $11.20 or 0.6 per cent lower at US$1,873.90 an ounce as Pfizer’s vaccine news dampened demand for havens.
