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Aussie shares look set to open higher for the first time in four sessions after US stocks rebounded ahead of inflation data tonight.
The S&P/ASX 200 will start the session 49 points or 0.67 per cent ahead, according to ASX futures.
The Australian benchmark fell to a three-week low yesterday as a choppy earnings season cranked up a gear. CSL, James Hardie and Seven West report today.
Overnight, oil rose to its highest in two weeks. Signs of soft Chinese demand weighed on iron ore. Gold and aluminium dropped to five-week lows. The Australian dollar firmed above 69 US cents.
Wall Street
US stocks rebounded from their worst week since December as traders squared positions ahead of a potentially-explosive January consumer inflation report. Megacap growth stocks fuelled gains.
The S&P 500 rallied 47 points or 1.14 per cent. The Dow Jones Industrial Average rose 377 points or 1.11 per cent. The Nasdaq Composite added 174 points or 1.48 per cent.
The Nasdaq spearheaded the rally as bond yields backed off five-week highs. The tech-heavy index slumped 2.41 per cent last week after a succession of Federal Reserve officials warned the cost of borrowing was going higher and likely to stay there all year.
An upgrade from Stifel lifted Microsoft 3.12 per cent. Facebook owner Meta Platforms jumped 3.03 per cent following reports of more layoffs. Apple, Amazon and Nvidia all gained at least 1.8 per cent.
Tonight’s US consumer price index could make or break this year’s recovery in stocks. Economists expect the CPI to decline to 6.2 per cent from 6.5 per cent in December.
“If the inflation reading shows further improvement and drops further from its previous, then that would be the best news for market players and it is highly likely to bring more bulls to the market,” Naeem Aslam, chief market analyst at AvaTrade, said.
“However, if the reading begins to make a U-turn and shows an uptick, we could easily see panic creeping in among traders as they are more than likely to anticipate a lot more hawkish policy from Fed.”
A lacklustre Q4 earnings season has failed to soothe concerns about the outlook for the year ahead. More than three-quarters of S&P 500 companies have now reported earnings.
“Of these companies, 69% have reported actual EPS [earnings per share] above the mean EPS estimate, which is below the 5-year average of 77% and below the 10- year average of 73%. In aggregate, earnings have exceeded estimates by 1.1%, which is also below the 5-year average of 8.6% and below the 10-year average of 6.4%,” John Butters, senior earnings analyst at FactSet, said.
Australian outlook
The share market will try to find its feet this morning after a wobbly run in the last week. The S&P/ASX 200 closed at a three-week low yesterday as the interim earnings season threw up more duds than diamonds.
While is too early in the season for clear themes to emerge, a warning from JB Hi-Fi of a slowdown in growth last month could be a harbinger of things to come following last year’s surge in the cost of living. Today’s reports from Breville Group and Temple & Webster will be worth watching for any similar messages.
Also reporting today are CSL, Dexus, James Hardie (quarterly), Sims, Ansell, Challenger, Computershare, Seven West Media and SG Fleet.
The day’s economic data is all about attitude. ANZ releases its weekly measure of consumer sentiment pre-open. Westpac’s monthly measure of consumer sentiment drops at 10.30 am AEDT. NAB follows an hour later with a monthly gauge of business confidence.
Tech and consumer stocks spearheaded last night’s US rally. The I.T. sector put on 1.78 per cent, consumer discretionary 1.47 per cent and consumer staples 1.17 per cent.
The financial sector rallied 1.1 per cent, industrials 0.88 per cent and materials 0.52 per cent. Energy was the only drag, falling 0.6 per cent.
The dollar advanced 0.77 per cent to 69.66 US cents.
Commodities
Iron ore declined as an increase in port inventories and steel stocks signalled Chinese demand has yet to pick up after Lunar New Year. Steel inventories held by Chinese traders increased by 1.5 million tonnes last week, according to Mysteel. SteelHome data quoted by Reuters indicated portside iron ore inventory rose to the highest since mid-September.
The most-traded May ore on China’s Dalian Commodity Exchange dropped 2.2 per cent in daytime trade to 841.50 yuan (US$123.23) a tonne.
BHP‘s US-traded depositary receipts lifted 1.13 per cent. The miner’s UK listing added 0.31 per cent. Rio Tinto gained 0.93 per cent in the US and 0.17 per cent in the UK.
Gold fell to its lowest close in more than five weeks as recent recoveries in the US dollar and US treasury yields continued to sap buying interest. A “hot“ inflation report tonight would add to pressure on the yellow metal.
“Rumours are swirling the data could easily come in above estimates and a hot data point could lead to both U.S. equities and gold taking a quick and pronounced hit to the downside,” Jeff Wright, chief investment officer at Wolfpack Capital, told MarketWatch.
Gold for April delivery settled US$11 or 0.6 per cent lower at US$1,863.50 an ounce. The NYSE Arca Gold Bugs Index dropped 0.58 per cent.
Oil touched its highest level of the month, building on last week’s 8 per cent rally after Russia announce production cuts in retaliation for western price caps. Trading was light ahead of tonight’s US CPI.
Brent crude settled 22 US cents or 0.25 per cent ahead at US$86.61 a barrel after trading as high as US$86.95.
Aluminium sank to a five-week low after inventories held at London Metal Exchange warehouses nearly doubled since February 6. Benchmark aluminium on the LME dropped 0.59 per cent to US$2,426 a tonne.
Copper was boosted by data showing a pick-up in demand for Chinese bank loans. Benchmark copper firmed 1.16 per cent on the LME to US$8,960 a tonne. Lead gained 1.73 per cent, zinc 3.02 per cent and tin 1.12 per cent. Nickel dropped 3.57 per cent.
Battery metal miners bounced off a two-and-a-half week low in US trade. The Global X Lithium & Battery Tech ETF rallied 1.06 per cent on the New York Stock Exchange. The VanEck Rare Earth/Strategic Metals ETF gained 0.9 per cent.
