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Shares face early pressure following declines in the US as soaring commodity prices sharpened inflation fears, and soft jobless benefit claims undermined confidence in the recovery.  

ASX futures retreated 32 points or 0.47 per cent despite gains in raw materials as Chinese traders returned to the market. Copper hit a nine-year high. Iron ore surged to its strongest level since December.

Wall Street

A setback for the employment outlook saw US stocks open deep in the red before a partial recovery as traders bought the dip. By the close, the S&P 500 cut a loss of more than 1 per cent to 17 points or 0.44 per cent. The Dow Jones Industrial Average shed 119 points or 0.38 per cent. The Nasdaq Composite gave up 100 points or 0.72 per cent after being down more than 1.5 per cent.

First-time claims for unemployment benefits unexpectedly rose to 861,000 last week. The tally was the highest in a month and well above the Wall Street consensus of 773,000.

“The one part of the economy that has remained disappointing is clearly the employment picture,” Ryan Detrick, chief market strategist at LPL Financial, told Reuters.

Also weighing on sentiment was a downbeat forecast from Walmart. Shares in the Dow component company sagged 6.5 per cent after earnings fell short of expectations. The retail giant warned it expected sales to decline as a pandemic boost wears off.

Highly-leveraged tech stocks continued a week-long retreat amid concerns about rising borrowing costs. Bond yields in the US and Australia rose to their highest level in at least 11 months this week. Facebook dropped 1.5 per cent as investors mulled its decision to block news content in Australia.

“Stocks are sliding across the board with high-multiple growth names getting hit the hardest thanks to the unrelenting rise in yields,” Adam Crisafulli, founder of Vital Knowledge, wrote. “Earnings were underwhelming too, with Walmart’s EPS [earnings per share] miss and big spending guidance unnerving investors.”

Australian outlook

A week that began well and brought up a 50-week high on Wednesday looks set to sour a little as Wall Street continues to struggle with inflationary pressures. The ASX has handled the turbulence fairly well, with investors focused on the interim earnings season. The S&P/ASX 200 has put on almost 280 points since the start of the month. The index finished dead flat yesterday and would have to lose an improbable 80 points this session to turn negative for the week.   

Strength in iron ore and copper ought to underpin our miners today, but US action underwhelmed. The US materials sector sank 0.6 per cent. Volatile energy stocks slumped 2.3 per cent as oil retreated from 13-month highs. Financials dipped 0.5 per cent. Defensive utilities was the best of the sectors, adding more than 0.5 per cent.

Earnings season hit a peak yesterday, but there are plenty of big names scheduled to report before the month is out. Today brings updates Goodman Group, Cochlear, QBE, Cleanaway Waste, Inghams and Lovisa, as well as a few dozen smaller firms.

The December retail sales report is due at 11.30 am AEDT. Flash measures of manufacturing and services activity are also scheduled today.   

The dollar edged up 0.15 per cent to 77.69 US cents.

Commodities

Iron ore soared as Chinese steelmakers restocked after the week-long Lunar New Year holiday. The spot price for ore landed in China jumped $5.50 or 3.3 per cent to US$174.45 a tonne, the highest price since December.

Copper settled at a new nine-year high amid demand expectations as economies reopen. Copper climbed 2.1 per cent to US$3.901 a pound in the US.

BHP and Rio Tinto hit record levels earlier this week and were mixed in overnight action. BHP’s US-listed stock inched up 0.16 per cent afer its UK-listed stock fell 0.42 per cent. Rio Tinto gained 0.58 per cent in the US and traded unchanged in the UK.

Gold broke a four-session losing run in unconvincing fashion. Metal for April delivery settled $2.20 or 0.1 per cent higher at US$1,775 an ounce. On Wednesday, the yellow metal hit its lowest level since June.

“There are just much more attractive assets at this point,” James Hatzigiannis, chief market strategist at Ploutus Capital Advisors, told MarketWatch. “Really, the only way for gold to break through that US$1,800 psychological level is for yields to calm down and actual hard confirmations that the pandemic is entering its final leg.” 

Oil retreated following reports Saudi Arabia will look to increase production now prices have recovered. Brent crude settled 41 cents or 0.6 per cent lower at US$63.93 a barrel. The Wall Street Journal reported the Saudis intend to reverse unilateral production curbs that have supported the rally in crude.

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