Stocks are set to open under mild pressure after trade worries and a deepening bond yield-curve inversion dragged Wall Street underwater.
SPI 200 index futures retreated 10 points or 0.2 per cent to 6420 as a morning rally in the US ran out of steam. The Dow rose as much as 150 points at the open before fading to a loss of 121 points or 0.47 per cent. The broader S&P 500 gave up nine points or 0.32 per cent and the Nasdaq 27 points or 0.34 per cent.
The declines followed a fresh burst of recession signals from bond markets, where the inversion between the ten-year US treasury yield and the two-year blew out to the widest since 2007. A bond yield inversion is seen as an important indicator because one has occurred before each of the last five US recessions. However, the indicating event precedes the recession by an average of 22 months, according to Credit Suisse.
Also weighing on market sentiment was denials from China that trade negotiators had been in contact with their US counterparts. Share markets rallied yesterday after US President Donald Trump told reporters China was pushing for a resumption of talks. China’s foreign ministry reiterated yesterday that there had been no contact. The editor-in-chief of a Communist Party-controlled newspaper said China was “not putting so much emphasis on trade talks”. The Shanghai Composite yesterday rallied 1.35 per cent after the government announced 20 new measures to boost domestic consumption to offset the impact of US trade tariffs. The ASX 200 rebounded 31 points or 0.5 per cent to 6471.
A decline in iron ore towards six-month lows kept a lid on Australia’s largest exporters in overnight action. BHP’s US-listed stock declined 0.17 per cent and its UK stock shed 0.46 per cent. Rio Tinto ticked up 0.25 per cent in the UK, but rolled over to a loss of 0.31 per cent in the US. The spot price for ore landed at China’s Tianjin port slid $2.90 or 3.4 per cent yesterday to $83.10 a tonne.
Gold scaled fresh six-year highs as havens remained well-bid. Gold for December delivery settled $14.60 or 1 per cent stronger at $US1,551.80 an ounce, the most-active contract’s highest finish since April 2013. The precious metal has broken out of its trading range and has room to move towards $US1,600, according to technical analysts at Wells Fargo Investment Institute.
Oil was boosted by news that more oil producing nations had limited their output in line with OPEC caps. The oil cartel announced compliance with production limits last month was the highest of the year. Brent crude settled 81 cents or 1.4 per cent ahead at $US59.51 a barrel.
Copper climbed off two-year lows, but zinc and tin touched their weakest points since 2016 as the trade war weighed on a choppy session on the London Metal Exchange. Copper was bid up 0.9 per cent at the close, lead gained 1.5 per cent and nickel 0.3 percent. Zinc sold for at its weakest price since October 2016 before rebounding 0.9 per cent. Tin lost 0.9 per cent and aluminium 0.5 per cent.
On currency markets, the dollar eased a third of a cent to 67.51 US cents.
Turning to the day ahead,companies reporting earnings include Oz Minerals, tech darling Appen, Bega Cheese, Independence Group and Medusa Mining. Quarterly construction figures are due at 11.30 am Eastern Standard Time. The economic calendar in the US has been light so far this week, but tonight brings an update on US crude inventories and tomorrow night the important preliminary quarterly GDP number.