The share market’s seven-session winning streak faces its first real test after twin setbacks in the search for a coronavirus vaccine helped sink US stocks.
ASX SPI200 index futures fell 55 points or 0.9 per cent, signalling early pressure for the local market following a golden run that has lifted the S&P/ASX 200 by 404 points or 7 per cent since last Monday.
US stocks stuttered overnight after both Johnson & Johnson and Eli Lilly announced delays in vaccine trials to address safety concerns. The S&P 500 fell 22 points or 0.63 per cent to its first loss in five sessions. The Dow Jones Industrial Average gave up 158 points or 0.55 per cent. The Nasdaq Composite eased 12 points or 0.1 per cent.
The market opened lower after Johnson & Johnson announced it had paused trials on its Covid-19 vaccine candidate due to an unexplained illness in a trial participant. Stocks hit their session lows when Eli Lilly later revealed its US government-sponsored trial had been paused by regulators due to a “potential safety concern”. Johnson & Johnson shares shed 2.3 per cent. Eli Lilly fell 2.9 per cent.
“It shows once again that the vaccine is still far away, and it’s a good thing that so many pharmaceutical companies are working on it,” Oliver Pursche, president of Bronson Meadows Capital Management in the US, told Reuters.
The vaccine delays compounded pressure from a downbeat start to the new quarterly corporate reporting season. Financial heavyweights JPMorgan Chase and Citigroup beat analyst expectations but saw their share prices decline. Shares in JPMorgan Chase lost 1.6 per cent and Citigroup 4.8 per cent. Delta Air Lines dropped 1.3 per cent after reporting a US$5.4 billion net loss and warning it could take more than two years for earnings to normalise. Investment manager BlackRock bucked the trend with a rise of 3.9 per cent after increasing its assets under management.
The prospects for a pre-election boost from a coronavirus relief package diminished once again after Democrat House Speaker Nancy Pelosi rejected the latest White House proposal, saying it fell short of what the pandemic and recession required.
A rampant S&P/ASX 200 yesterday hit its highest level since March, cracking the stubborn 6200 level for the first time since the market’s initial pandemic panic plunge. The index rose as high as 6215 but faded to finish at 6195, back within a trading zone that has proved a Waterloo for previous rallies in June, July and August.
While this month’s stimulus-fuelled rally feels stronger now the banks are participating, the next attempt on 6200 will likely have to wait until later in the week/month following overnight events. Wall Street continues to demonstrate a peculiar sensitivity to developments both positive and negative in vaccine trials.
Nine out of eleven US sectors declined, led by financials -1.9 per cent, real estate -1.7 per cent and energy -1.6 per cent. Communication services rose 0.4 per cent and consumer discretionary less than 0.1 per cent.
A plus for exporters was a retreat in the dollar as the US unit attracted haven buying. The Aussie dropped 0.7 per cent to 71.59 US cents.
Oil was boosted by news of a 2 per cent rebound in Chinese crude imports last month – an increase of almost 12 million barrels a day, according to analysts at Commerzbank. Brent crude settled 73 cents or 1.8 per cent higher at US$42.45 a barrel.
US gold miners trended lower after gold reversed back below US$1,900 an ounce under pressure from a rising US dollar. The Arca Gold Bugs index eased 0.7 per cent. Gold for December delivery settled $34.30 or 1.8 per cent weaker at US$1,894.60 an ounce, the yellow metal’s first loss in four sessions.
A second straight decline in iron ore weighed on BHP and Rio Tinto in overseas trade. BHP’s US-listed stock shed 0.86 per cent after its UK-listed stock edged up 0.19 per cent. Rio Tinto lost 0.99 per cent in the US and 0.32 per cent in the UK. The spot price for iron ore landed in China slid $2.50 or 2 per cent to US$121.35 a tonne.
Industrial metals declined with other risk assets as the vaccine delays compounded down-pressure from a rising greenback. Benchmark copper on the London Metal Exchange eased 0.7 per cent to US$6,681.75 a tonne. Nickel dropped 0.8 per cent, lead 2.6 per cent and zinc 1 per cent. Tin traded unchanged. Aluminium inched up 0.1 per cent.