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Aussie shares looked set to extend last week’s rebound at today’s open as gains in key commodities offset mild losses on Wall Street.
ASX futures rallied 11 points or 0.16 per cent.
US stocks retreated as inflation worries weighed on tech stocks. Iron ore bounced almost 4 per cent. Oil climbed to a two-year high. Gold and industrial metals rose.
Wall Street
The US trading week got off to a lacklustre start as lingering inflation worries held the major indices underwater all night. A late rally trimmed losses.
The S&P 500 finished 11 points or 0.25 per cent in the red. The Dow Jones Industrial Average shed 54 points or 0.16 per cent. The Nasdaq Composite gave up 51 points or 0.38 per cent.
With no major economic or corporate data to provide direction, the market resumed the selling that pulled the S&P 500 down 1.4 per cent last week. The tech sector fell 0.7 per cent. Microsoft lost 1.2 per cent, Apple 0.93 per cent and Netflix 0.9 per cent.
Tesla fell 2.19 per cent after regulatory filings revealed Michael Burry’s Scion Asset Management had a short position on the electric carmaker. Burry, who foresaw and profited from the US’s subprime mortgage crisis, was featured in The Big Short book and movie about the GFC.
Value stocks weathered the down-pressure better than growth. The Russell 1000 Growth Index fell 0.48 per cent, versus a 0.09 per cent dip in the Value Index. The Value Index has risen around 17 per cent this year, versus a 4 per cent increase in the Growth Index.
Wall Street was coming off the back of a volatile swing week that saw the S&P 500 fall 4 per cent in three sessions before recouping most by Friday’s close. Volatility measures jumped as markets responded to a surge in US inflation last month.
“Volatility has picked up because a lot of the good news has been priced in, and last week we finally saw fears of inflation,” Greg Marcus, managing director at UBS Private Wealth Management, told Reuters. “I certainly wouldn’t want to be putting new money towards (tech). The best hedges you can have are cyclical companies such as materials and industrials, and financials,” he added.
Federal Reserve Vice Chair Richard Clarida insisted the April surge in inflationary pressures would prove temporary. He said it was too early to talk of tapering the central bank’s stimulus spending.
“What I would say is, in my judgment, through that April employment report, we have not made substantial further progress,” he said. “There’s still a deep hole in the labor market,” he added.
Australian outlook
Negative US futures arguably cheated the ASX out of a decent bounce yesterday, allowing room for further healing this session. The S&P/ASX 200 rose as much as 51.5 points yesterday morning following Wall Street’s best session in a month, but finished a mere nine points ahead as US futures deteriorated. In the event, overnight weakness was mild, hence this morning’s rise in ASX futures.
Commodity markets steadied after last week’s wild ride. BHP and Rio Tinto rallied in overseas trade as iron ore and copper bounced. US materials put on 0.9 per cent. The US energy sector jumped 2.3 per cent as US crude hit its highest level since April 2019. US financials edged up 0.13 per cent.
Rate-sensitive US sectors declined. Besides the 0.7 per cent fall in tech, communication services (Facebook, Netflix, Alphabet) fell 0.88 per cent, utilities 0.86 per cent and industrials 0.28 per cent.
The minutes from the most recent Reserve Bank policy meeting were due to be released at 11.30am AEST. Any change in wording/tone had the potential to change the market mood.
Last week’s postponed Audeara IPO was rescheduled to today.
The dollar eased 0.14 per cent to 77.66 US cents.
Commodities
Iron ore rebounded after Chinese data showed steel production running at record pace last month. Crude steel output reached 97.9 million tonnes despite government attempts to cool production to reduce pollution and moderate red-hot prices. The spot price for ore landed in China bounced $7.65 or 3.7 per cent to US$217 a tonne.
“As China’s steel production still continues to expand, its steel margins remain elevated and seaborne iron ore supply remains constrained, we think that the iron ore price can stay around the current level through 2Q, but is likely to remain highly volatile,” analysts at Morgan Stanley wrote.
BHP and Rio Tinto followed iron ore and copper higher. BHP’s US-listed stock advanced 1.59 per cent and its UK-listed stock put on 1.06 per cent. Rio Tinto rebounded 2.72 per cent in the US and 2.28 per cent in the UK.
US crude climbed to its highest finish in more than two years amid optimism over the improving economic outlook in Europe and the US. West Texas Intermediate settled 90 cents or 1.4 per cent ahead at US$66.27 a barrel. Brent crude climbed 75 cents or 1.1 per cent to US$69.46 a barrel, its strongest finish since March.
Copper pushed back towards record levels, supported by the threat of strikes in major producer Chile. Benchmark copper on the London Metal Exchange rose 1.3 per cent to US$10,344.75 a tonne. Aluminium gained 1.3 per cent, nickel 2.1 per cent, lead 2.4 per cent, zinc 2.5 per cent and tin 1.2 per cent.
Gold hit a level last seen in January as the greenback and treasury yields softened. Metal for June delivery settled $29.50 or 1.6 per cent ahead at US$1,867.60 an ounce. The NYSE Arca Gold Bugs Index jumped 5.54 per cent.
“Technically, June gold futures bulls have the firm overall near-term technical advantage amid a seven-week-old price uptrend in place on the daily bar chart,” Jim Wyckoff, senior analyst at Kitco, wrote.
