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A late sell-off on Wall Street over stalled stimulus talks points to a subdued start to Australian trade.
Index futures indicate the market will open nine points or less than 0.2 per cent higher unless financial heavyweight Commonwealth Bank’s full-year earnings report contains a surprise.
The banking giant is the first of the big four to report. Today’s result will be closely scrutinised for the effects of the coronavirus pandemic and broader implications for the rest of the reporting season. Also scheduled to report today according to CommSec are Transurban Group, SEEK, Computershare, Downer EDI and Magellan Financial Group.
US stocks turned sharply lower in afternoon trade after Senate Republican leader Mitch McConnell told Fox News negotiations with Democrats over a new stimulus package had reached a stalemate. McConnell said the White House had not spoken to Democratic leaders that day.
A market that had been betting on a deal swiftly unwound its gains. The Nasdaq led the reversal as a rotation out of Big Tech into value stocks accelerated. The tech-heavy index finished 186 points or 1.69 per cent lower.
The S&P 500 rallied within half a percentage point of an all-time high before flipping a 0.6 per cent rally into a loss of 27 points or 0.8 per cent. The Dow shed 105 points or 0.38 per cent.
Declines in the likes of Apple, Microsoft, Alphabet and Netflix outweighed gains in high-street retailers, cruise lines and resorts. Sentiment towards battered growth stocks has improved amid signs the worst of the pandemic may have passed in the US. The number of cases has dropped 18 per cent in two weeks.
“It just feels like an acceleration of the growth unwind that started last Friday,” Wedbush trader Joel Kulina told Reuters. “Today marks day three of the unwind out of ‘growth’. But I’m not seeing panicking.”
Wall Street’s early gains followed news Russian regulators had approved the world’s first vaccine for COVID-19. Russian President Vladimir Putin claimed the vaccine had passed all necessary checks and was safe for use. No data have been published by the researchers, causing some scepticism in the medical community.
Gold stocks plunged after the yellow metal suffered its biggest dollar collapse in seven years. The prospect of a vaccine helped send gold for December delivery down $93.40 or 4.6 per cent to US$1,946.30 an ounce. Silver also took a heavy hit, tumbling 11 per cent. The NYSE Arca Gold Bugs Index shed 7.38 per cent. Gold had climbed to record levels amid uncertainty over an end to the pandemic.
“Traders who were looking for an excuse to lock-in profits with their bullish gold bets jumped all over the Russia’s vaccine news,” Edward Moya, senior market analyst at Oanda in the US, wrote.
Australia’s mining giants helped lift the local market to a nine-week high yesterday. The S&P/ASX 200 finished 28 points or 0.5 per cent ahead at 6139 after climbing as high as 6186, a level last seen on June 9. BHP put on 0.9 per cent here and 1.49 per cent in the UK, but lost 0.58 per cent in the US as the mood soured. Rio Tinto gave up 0.42 per cent in the US after gaining 0.79 per cent in the UK and 0.85 per cent here yesterday as the spot price for iron ore landed in China rallied $2.60 or 2.2 per cent to US$121.45 a dry ton.
Oil caught some collateral damage from traders selling to cover losses in precious metals. Brent crude settled 49 cents or 1.1 per cent lower at US$44.50 a barrel.
“Oil could not ignore the big correction in precious metals,” Phil Flynn, senior market analyst at The Price Futures Group, told MarketWatch. The sell-off in metals triggered “some trickle-over margin selling on oil,” he said.
Lead outperformed on the London Metal Exchange, rising 3.3 per cent. Copper dipped 0.2 per cent to US$6,381.75 a tonne. Aluminium lost less than 0.1 per cent and tin 0.1 per cent. Nickel gained 0.4 per cent and zinc 0.5 per cent.
The dollar eased 0.1 per cent to 71.42 US cents.
