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A big week of corporate trading updates looks set for a flat start following a mixed end to Wall Street’s worst week in almost two months.
ASX futures closed unchanged as a decline in the Nasdaq offset gains for the Dow and S&P 500 on Friday.
Oil was boosted by Russian production cuts. Iron ore overcame early losses. Gold, copper and other industrial metals declined. The dollar was trading this morning just above 69 US cents.
Earnings season hits its stride this week with updates from many of the index’s largest companies, including three of the big four banks, CSL, Telstra, Fortescue Metals and Wesfarmers.
Wall Street
Wall Street’s main indices finished mixed as investors weighed upbeat consumer sentiment data, rising bond yields and mostly disappointing corporate earnings.
The S&P 500 rallied late in choppy trade to a gain of nine points or 0.22 per cent. The Dow Jones Industrial Average advanced 169 points or 0.5 per cent. The Nasdaq Composite gave up 71 points or 0.61 per cent.
A 13-month high in consumer sentiment soothed recession worries. The University of Michigan’s preliminary reading climbed to 66.4 from 64.9 in January. A separate measure about how Americans feel about the state of the economy rose to its highest in 14 months.
“The consumer is in a relatively good place,” Geoff Dailey, deputy head of US equities at BNP Paribas Asset Management, told MarketWatch.
The Nasdaq was held back by the steady creep of borrowing costs and by some high-profile earnings misses. The yield on ten-year US treasuries climbed to its highest in a month after weak demand for an auction of 30-year bonds on Thursday.
“Investors are wondering what the bond market is telling us that economic indicators are not telling us,” Sam Stovall, chief investment strategist at CFRA Research, said. “Higher bond yields are going to more adversely affect the higher growth technology companies.”
Ride-hailing app Lyft lost more than a third of its value after forecasting smaller revenues this quarter than analysts anticipated. Travel-booking platform Expedia slumped 8.55 per cent after a contraction in Q4 income.
News Corp’s US stock shed 9.37 per cent after the dual-listed media group announced a 64 per cent reversal in net income. The group’s Australian stock lost 6.88 per cent on Friday.
Energy producers helped the Dow and S&P 500 move higher after Russia retaliated against western price caps by announcing production cuts. Chevron was the Dow’s best performer, rising 2.1 per cent.
The S&P 500 and Nasdaq logged their heaviest weekly losses since December after the Federal Reserve doused hopes of rate cuts later this year and an underwhelming earnings season continued. Just 70 per cent of S&P 500 companies have beaten expectations this reporting season, below the three-year historical average of 79 per cent.
For the week, the Nasdaq declined 2.41 per cent, the S&P 500 lost 1.11 per cent and the Dow 0.17 per cent.
Australian outlook
Australian shares look to be in wait-and-see mode this morning following the market’s first losing week of 2023. The S&P/ASX 200 skidded 56.6 points on Friday, stretching its loss for the week to 124 points or 1.6 per cent. That compares well to the Nasdaq (-2.41 per cent), but less favourably against the S&P 500 (-1.11 per cent) and Dow (-0.17 per cent).
Energy producers and defensive sectors led in the US on Friday as rising bond yields pressured growth sectors. The energy sector gained 3.92 per cent, utilities 2 per cent, health 0.94 per cent and consumer staples 0.93 per cent. Financials gained 0.4 per cent. Materials firmed 0.36 per cent.
At the other end, tech lost 0.55 per cent, communication services (News Corp, Netflix, Meta) 0.89 per cent and consumer discretionary (Expedia, Tesla) 1.22 per cent.
Insurers (a traditional defensive buy) offered some of the ASX 200’s best gains during last week’s challenging run. Medibank Private advanced 5.8 per cent for the week, Suncorp 4 per cent and NIB 3.5 per cent. Gold miner Newcrest was the index’s only double-digit gainer, rising 10.2 per cent following a takeover offer from US giant Newmont.
With the outlook for interest rates setting the tone on financial markets, testimony from RBA Governor Philip Lowe in Canberra on Wednesday and Friday looms as a potential highlight this week. Lowe is due to appear before the Senate Economics Legislation Committee on Wednesday and the House Standing Committee on Economics on Friday.
This week’s other potential domestic market-mover is Thursday’s jobs report. Economists expect total employment to rebound by 20,000 positions after the December jobs shock.
Also this week: monthly business confidence data and monthly and weekly consumer confidence gauges on Tuesday.
The US outlook is dominated by inflation gauges: January consumer prices on Tuesday and producer prices on Thursday. Federal Reserve officials will be out in force on Tuesday. Other potential market-moving reports this week include retail sales and Empire State manufacturing on Wednesday and weekly jobless claims and housing data on Thursday.
A huge week of corporate earnings kicks off today with updates from Lendlease, JB Hi-Fi, Beach Energy, Carsales.com, Endeavour Group, IAG, Imdex, Aurizon and Lifestyle Communities.
CSL tops the list of companies reporting on Tuesday. Also tomorrow are Dexus, James Hardie (quarterly), Sims, Ansell, Challenger, Computershare, Seven West Media, Temple & Webster, SG Fleet and Breville.
Wednesday brings three heavyweights in Commonwealth Bank, Wesfarmers and Fortescue Metals. Also scheduled: Cochlear, Vicinity Centres, Treasury Wine Estate, Seven Group, Pro Medicus, Pact Group, Corporate Travel Management, Fletcher Building, GUD, SkyCity, GWA and Netwealth.
Thursday is the heaviest day of the week with updates from Telstra, Goodman Group, Newcrest, NAB (quarterly), AMP, ASX, Origin Energy, South32, Sonic Healthcare, Whitehaven Coal, Abacus, Orora, Bapcor, Incitec Pivot, IPH, Magellan, Super Retail Group, Southern Cross Media, Evolution Mining, Domain Holdings and Growthpoint Properties.
A big week wraps on Friday with Westpac (quarterly), QBE, Inghams, Baby Bunting, HealthCo Healthcare and Wellness REIT and Latitude Group.
GrainCorp and Incitec Pivot hold AGMs on Thursday.
IPOs: there is one solitary listing pencilled in for the week ahead. South-East Queensland Exploration is scheduled to debut on Thursday. This Queensland-based explorer has projects that are prospective for copper and gold.
The dollar started the week with a rise of 0.19 per cent to 69.21 US cents.
Commodities
Oil capped its best week since October with further gains on Friday after Russia retaliated against western price caps by slashing production. Moscow announced it would reduce output by 500,000 barrels per day next month.
“By cutting back volumes, Russia wants to signal that it would rather forego volume than reduce its price,” Manish Raj, managing director at Velandera Energy Partners, told MarketWatch.
The European Union and Group of Seven nations have imposed limits on the price Russia can charge for its oil and oil products as a punishment for the invasion of Ukraine. Russia’s Deputy Prime Minister Alexander Novak condemned the price caps as “an interference in market relations and a continuation of the destructive energy policy of the countries of the collective West.”
Some commentators suggested the cuts were a sign Russia was struggling to sell current production. However, Novak insisted reducing production was a matter of principle.
“To date, we are fully selling the entire volume of oil produced, however, as previously stated, we will not sell oil to those who directly or indirectly adhere to the principles of the price ceiling,” he said.
Brent crude settled US$1.89 or 2.2 per cent higher at US$86.39 a barrel. For the week, the international benchmark gained 8.1 per cent. The US benchmark, West Texas Intermediate, put on 2.1 per cent for the day and 8.6 per cent for the week.
Iron ore overcame early weakness amid signs steel margins were improving from depressed levels. Analysts at Sinosteel reported profitability at steel mills had risen for five weeks, with an accompanying lift in output of molten iron.
The most-traded May ore on China’s Dalian Commodity Exchange ended daytime trade 0.8 per cent ahead at 863.50 yuan (US$126.98) a tonne.
BHP‘s US-traded depositary receipts shed 1.05 per cent. Earlier, the miner’s UK listing declined 1.73 per cent. Rio Tinto gave up 1.41 per cent in the US and 1.84 per cent in the UK.
Gold booked a modest weekly loss as a rising greenback and improving returns on US treasuries depressed interest in alternative stores of wealth. Gold for April delivery settled US$4 or 0.2 per cent lower on Friday at US$1,874.50 an ounce.
“Precious metals remained out of favour with gold hovering around $1,860 and silver just above $22.00 as bond yields pushed higher and the dollar remained supported. In recent days, the dollar has come back to life, and has been supported on the dips, in response to the Fed’s hawkish comments and mixed data,” Fawad Razaqzada, market analyst at City Index, said.
The NYSE Arca Gold Bugs Index dipped 0.23 per cent. For the week, the yellow metal lost 0.1 per cent.
Copper logged a third straight weekly loss after rising inventories showed Chinese demand had yet to pick up. Stockpiles at Shanghai exchange warehouses have risen almost fivefold since late December during a time of seasonal weakness.
Benchmark copper on the London Metal Exchange dropped 1.4 per cent o on Friday to US$8,857.50 a tonne. Aluminium lost 2.34 per cent, nickel 4.63 per cent, lead 2.23 per cent, zinc 2.58 per cent and tin 1.43 per cent.
An index of battery metal miners fell to its lowest in two and a half weeks following another losing week for lithium. Chinese spot lithium prices peaked in November and have since fallen more than 24 per cent.
The Global X Lithium & Battery Tech ETF lost 1.92 per cent on the New York Stock Exchange. The VanEck Rare Earth/Strategic Metals ETF shed 1.76 per cent.
