Join our daily newsletter At The Bell to receive exclusive market insights
Aussie shares were set to open higher as a late rally on Wall Street helped offset further declines on commodity markets.
US stocks closed ahead for a third night after the Federal Reserve reaffirmed its commitment to bring down inflation.
Brent crude traded under US$100 a barrel for the first time since April. Gold logged its longest losing run in more than two years. Copper neared a 20-month low. Iron ore prices were mixed.
ASX futures rallied 35 points or 0.54 per cent, suggesting a swift reversal of yesterday’s 35-point fall on the S&P/ASX 200.
Wall Street
US stocks swung higher after the minutes from last month’s Fed meeting indicated the central bank may raise its benchmark rate by 50 basis points this month. An increase of that size would be smaller than the 75 basis points already priced in by the market.
The S&P 500 jumped to a gain of 14 points or 0.36 per cent. The Dow Jones Industrial Average put on 70 points or 0.23 per cent. The Nasdaq Composite added 40 points or 0.35 per cent.
The Fed minutes offered something for both market bulls and bears. The central bank indicated it was committed to further rate hikes after increasing the federal funds rate by 75 basis points last month. The increase was the largest since 1994.
“Participants concurred that the economic outlook warranted moving to a restrictive stance of policy, and they recognized the possibility that an even more restrictive stance could be appropriate if elevated inflation pressures were to persist,” the minutes said.
But having concluded that another 75bp raise at this month’s meeting was a lock, bulls appeared to take heart from signs the central bank might not go as hard as previously expected. The bank left the door open to a 50bp hike.
“Participants judged that an increase of 50 or 75 basis points would likely be appropriate at the next meeting,” the minutes said.
A smaller increase this month would mean rates might peak lower than the market has been pricing in. US stocks fell into a bear market this year amid concerns an aggressive series of rate increases could tip the economy into recession.
“I think people are heavily focused on the terminal rate of what the Federal Reserve’s increases are, and the 50-75 debate just points towards where you end up,” Jason Pride, chief investment officer of private wealth at Glenmede, told Reuters.
The minutes were the turning point during a see-saw session where the main indices traded both sides of break-even. Stocks kicked higher, but finished off their session peaks.
Big Tech provided much of the late momentum. Apple, Alphabet and Meta Platforms all gained around 1 per cent. Energy stocks fell as US crude dipped into a bear market.
Australian outlook
Three days of Wall Street gains should be enough to steady the Australian market after yesterday’s commodities-fuelled wobble. The S&P/ASX 200 declined 35 points or 0.52 per cent yesterday as key exports succumbed to fears of demand destruction as the global economy slows.
Some of those pressures eased overnight. Investors will take heart from partial rebounds in iron ore and some industrial metals. However, crude, copper, nickel, tin and gold continued to lose ground.
Tech was yesterday’s best ASX performer and has solid leads for the session ahead. The sector climbed 0.88 per cent in the US. Utilities was the day’s best with a rise of 1.01 per cent.
US materials bounced 0.62 per cent, but the session brought no relief for energy producers. Energy was the night’s worst-performing sector, losing 1.74 per cent. Also soft were financials -0.25 per cent and consumer discretionary -0.24 per cent.
Back home, the Australian Industry Group releases its monthly gauge of services sector activity at 8.30 am AEST. Trade figures follow at 11.30.
IPOs: the debut of Aeramentum Resources originally pencilled in for today has been pushed back, new date to be announced.
The dollar remained mired near two-year lows. The Aussie eased 0.17 per cent this morning to 67.82 US cents.
Commodities
US oil entered a technical bear market after extending Tuesday’s 8.2 per cent slide. The international benchmark, Brent crude, dipped below US$100 a barrel for the first time since April before recovering some of its loss.
“As fears of recession continue to trade blows with tight supply conditions, the former is clearly coming out victorious over the past 24 hours,” Robbie Fraser, global research & analytics manager at Schneider Electric, said.
West Texas Intermediate settled 97 cents or 1 per cent lower at US$98.53. The fall extended the US benchmark’s decline from its March settlement peak of US$123.70 beyond 20 per cent.
Brent crude settled US$2.08 or 2 per cent in the red at US$100.69 a barrel after trading as low as US$98.50.
Iron ore prices finished mixed amid a fresh Covid scare in China. The recommencement of mass testing raised fears of further lockdowns as authorities battle new outbreaks.
“As we have repeatedly said, tighter covid measures could return to China. And there are more positive covid tests once more in Shanghai,” ING economists said.
The spot price for ore landed in China fell US$1.09 or 1 per cent to US$112.33 a tonne. The most-traded ore contract on the Dalian Commodity Exchange finished 1.8 per cent higher at US$11.42 after trading in and out of positive territory.
Gold slumped for a seventh session, the metal’s worst run since March 2019. Prices finished at their weakest level in more than 21 months as a strengthening US dollar continued to undermine demand for hedges.
Gold for August delivery settled US$27.40 or almost 1.6 per cent lower at US$1,736.50 an ounce. The NYSE Arca Gold Bugs Index eased 0.44 per cent.
Copper slumped as much as 4.9 per cent on the London Metal Exchange before paring its loss. Benchmark copper finished 2 per cent lower at US$7,506.25 a tonne.
“The weakness overnight looks like it was driven by China and the COVID problems they’re still facing,” Ole Hansen, head of commodity strategy at Saxo Bank, said.
Nickel lost 3.6 per cent and tin 5.1 per cent. Aluminium bounced 0.8 per cent, lead 1.3 per cent and zinc 0.3 per cent.
In overnight trade, BHP‘s US-traded depositary receipts declined 0.83 per cent. The miner’s UK stock eased 0.44 per cent. Rio Tinto dipped 0.03 per cent in the US after bouncing 1 per cent in the UK.
