Futures action points to early pressure on Australian shares after US equity futures retreated and European markets finished mixed in subdued trade during a US market holiday.
The S&P/ASX 200 will open 29 points or 0.4 per cent lower, according to overnight moves in the SPI 200.
Iron ore rose for a fourth session. Oil and industrial metals also advanced. The dollar climbed back above 69 US cents.
BHP heads up the list of companies reporting today. Also due to deliver trading updates are Coles, Tabcorp and Stockland. The Reserve Bank releases the minutes from this month’s policy meeting.
Europe and Wall Street
US equity futures retreated as a long weekend failed to suppress the interest rate worries that have enveloped financial markets in the last two weeks. Regular share trade on the Nasdaq and New York Stock Exchange was suspended overnight for Presidents’ Day.
S&P 500 futures declined 11.5 points or 0.28 per cent. Dow futures eased 80 points or 0.24 per cent. Nasdaq futures shed 24 points or 0.19 per cent.
The market’s spectacular start to the year stalled two weeks ago amid signs interest rates will go higher for longer to contain inflation. Global indices have retreated as markets priced in a higher top, or terminal rate, to this rates cycle. Market pricing now implies benchmark rates may go as high as 5.3 per cent in the US and 4.2 per cent here.
“Until recently, the market debate was all about soft-landing or hard-landing, recession or no recession. However, the real world is now not playing ball, prompting investors to come up with the idea of ‘no-landing’ at all,” Kingswood chief economist Rupert Thompson told Reuters.
“This new concept of ‘no-landing’ is not really that helpful, not least because, as any airline pilot will testify, there is ultimately either a soft or hard landing. Arguably, the day of reckoning has just been postponed until the second half of the year with any U.S. recession now looking more likely to occur then, if one occurs at all,” he said.
European shares were mixed as gains in miners offset weakness in tech and consumer stocks.
The pan-European Stoxx 600 inched up 0.07 per cent. In the UK, the FTSE 100 index added 0.12 per cent. Germany’s DAX index slipped 0.03 per cent. France’s CAC 40 lost 0.16 per cent. Italy’s FTSE MIB shed 0.56 per cent.
Australian outlook
A downbeat start appears likely after soft US equity futures capped buying interest in Europe. Futures trade points to a new five-week low for the S&P/ASX 200, reversing yesterday’s slender five-point advance.
How accurate the futures outlook proves for today’s final destination will likely be determined by two events. Market heavyweight BHP releases half-year earnings at 8.30 am AEDT. The RBA releases the minutes from this month’s meeting three hours later.
With an index weighting of around 10 per cent, BHP has the bulk to move the ASX 200 a long way on its own. Its result will also affect fellow bulk metal miners Rio Tinto and Fortescue Metals.
Overnight action in the UK suggested few concerns. BHP‘s UK-traded stock popped 3.14 per cent. Rio Tinto gained 2.85 per cent.
Also reporting today are Coles, Stockland, Alumina, Tabcorp, Iluka, Monadelphous, HUB24, G8 Education, Seek, Costa Group, Estia Health, AMA, ARB Group, HT&E, Macquarie Telcom, Judo Bank, Ingenia, Viva Energy and Johns Lyng.
The minutes from this month’s Reserve Bank meeting are unlikely to have a major impact on trader sentiment unless there is a surprise hidden in the board’s discussion. The bank decided to raise the cash rate target by 25 basis points to 3.1 per cent and indicated further increases were expected.
“The Australian interest rate market is 75% priced for a 25bp rate hike at the RBA’s Board meeting in March, which would take the cash rate to 3.60%. The market expects the RBA’s terminal rate to reach 4.19% in July,” Tony Sycamore, market analyst at IG, said.
The dollar took advantage of the US holiday to recover lost ground overnight. The Aussie climbed 0.64 per cent to 69.13 US cents.
Challenger, Magellan, IPH, Endeavour Group and Computershare trade ex-dividend today.
Commodities
Iron ore rose for a fourth session after new house prices in China improved for the first time in a year. Traders were also looking ahead with optimism to the possibility of fresh economic stimulus measures at next month’s National People’s Congress.
The most-traded May ore on China’s Dalian Commodity Exchange traded as high as 898.5 yuan before ending day-time trade 1 per cent ahead at 894 yuan (US$130.35).
Buying interest in copper and other industrial metals was boosted by a “risk-on” session yesterday in China and Hong Kong. The Shanghai Composite surged 2.06 per cent after Goldman Sachs forecast a strong recovery in Chinese shares this year.
Goldman predicted Chinese stocks could rally as much as 24 per cent as the economy swings from “reopening to recovery”. Hong Kong’s Hang Seng index lifted 0.81 per cent.
Benchmark copper on the London Metal Exchange climbed 1.37 per cent to US$9,111 a tonne. Aluminium lifted 3.12 per cent, nickel 4.85 per cent, lead 5.04 per cent, zinc 1.91 per cent and tin 3.34 per cent.
Oil also caught a lift from optimism over improved Chinese demand as the recovery gains traction. Brent crude settled US$1.08 or 1.3 per cent ahead at US$84.08 a barrel.
Gold was little changed in electronic trade. Gold for April delivery was lately ahead 10 US cents or 0.01 per cent at US$1,850.30 an ounce.