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Aussie shares were poised to open under mild pressure ahead of inflation data and a market holiday following a mixed close on Wall Street as downbeat corporate earnings capped buying interest after two days of strong gains.

The Dow overcame early losses after a technical glitch at the start of trade halted trade in some companies. The S&P 500 and Nasdaq booked modest losses.

Gold climbed to its highest since April. Downbeat global manufacturing data weighed on oil and copper. Other industrial metals rallied. The dollar built on its move above 70 US cents.

The S&P/ASX 200 will open 10 points or 0.13 per cent weaker, according to futures action. The Australian benchmark is on a five-session win streak that swept it to a fresh nine-month high yesterday.

Wall Street

US stocks finished mixed as cautious corporate outlooks and soft economic data exacerbated recession worries.

The Dow Jones Industrial Average shrugged off early weakness, advancing 104 points or 0.31 per cent. The S&P 500 eased three points or 0.07 per cent. The Nasdaq Composite gave up 30 points or 0.27 per cent.

The opening auction was disrupted by a technical glitch that forced the New Stork Exchange to briefly halt more than 80 stocks, leaving traders uncertain whether orders had been filled. The US Securities and Exchange Commission said it was investigating the problem.

The latest batch of corporate earnings gave traders pause as Dow component company 3M warned of “a rapid decline” in consumer spending, and Verizon’s full-year forecast fell short of expectations.

3M CEO Michael Roman said sales slowed in December as “consumers sharply cut discretionary spending and retailers adjusted inventory levels.” The trend was expected to continue at least through the first half of the year, he added. The firm’s share price dropped 6.16 per cent.

Wall Street was coming off two days of gains that included back-to-back rises of more than 2 per cent for the Nasdaq Composite.

“We’ve had two really strong days in the market in anticipation that the Fed’s going to pause as we get into a busy week of earnings,” Victoria Fernandez, chief market strategist at Crossmark Global Investments, told CNBC. “But the earnings that we saw yesterday and this morning are really mixed.”

Also troubling investors was further evidence last year’s rate cuts are depressing the economy. Measures of manufacturing and services-sector activity improved fractionally as a new year got underway but continued to contract.  

The S&P Global “flash” US services sector index inched to a three-month high of 46.6 from 44.7 in December. The S&P Global manufacturing index lifted to 46.7 from a 31-month low of 46.2. Readings below 50 indicate shrinking activity.

“The U.S. economy has started 2023 on a disappointingly soft note,” Chris Williamson, chief business economist at S&P Global, said. “Companies cite concerns over the ongoing impact of high prices and rising interest rates, as well as lingering worries over supply and labor shortages.”

Australian outlook

This year’s rally faces its first real test this session in the form of inflation data at 11.30 am AEDT that has the power to set the tone of trade until next month’s Reserve Bank meeting.

The S&P/ASX 200’s 6.4 per cent advance since the start of the year has been built on the premise that Australian interest rates are near a top (the so-called “terminal rate”). The RBA will look for evidence in today’s data that consumer prices have peaked.

“Headline inflation is expected to increase by 1.6% QoQ taking annual inflation to 7.6% YoY from 7.3% in Q3. A sharp rise in electricity prices will drive the increase after the expiry of state subsidies,” Tony Sycamore, market analyst at IG, said.

“The trimmed mean is expected to rise by 1.6% YoY, taking the annual rate to 6.5% YoY from 6.1% in Q3. This would be the highest number since 1990 and likely mark the peak in inflation in Australia before it starts to turn lower, following the pattern viewed in the US, UK and the Eurozone in recent months.”

The ASX’s Rate Indicator tool puts the odds on another quarter-point interest rate hike next month at 53 per cent. Traders will look for a downside surprise today to ease pressure on the central bank to raise. A “hot” result would almost guarantee an increase in the cash rate target to 3.35 per cent.

Tomorrow’s public holiday looms as another headwind, with some traders likely to reduce positions. Wall Street will trade twice before the ASX reopens on Friday. Trade in China and Hong Kong remains suspended for Lunar New Year holidays.

The quarterly reporting season rolls on with updates today from Newcrest and Woodside Energy, as well as a slew of smaller companies.

Trade in the US leaned defensive overnight, with utilities, real estate and consumer staples among the best performers. Industrials gained 0.64 per cent, utilities 0.48 per cent, real estate 0.4 per cent and consumer staples 0.38 per cent.

The two sectors with the biggest weighting on the ASX were little changed. Financials gained 0.1 per cent. Materials added 0.03 per cent. Drags included health -0.65 per cent and energy -0.22 per cent.

The dollar cemented its move above 70 US cents, rising 0.21 per cent to 70.44 US cents.

Commodities

Oil backed off its highest level in two months as weak US and European economic data raised questions about the demand outlook. Measures of manufacturing and services sector activity in both continents contracted.

Michael Hewson, chief market analyst at CMC Markets UK, said there was “uncertainty about how much of a demand boost we’ll see, and concerns over a weakening U.S. economy constrains the upside.”

“With the latest PMI numbers in Europe and the UK showing signs of weakness despite lower energy prices, some doubt is creeping in around any sort of rebound in economic activity,” he added.

Brent crude settled US$2.06 or 2.3 per cent lower at US$86.13 a barrel. The US benchmark, West Texas Intermediate, dropped 1.8 per cent to US$80.13.

Gold finished at a fresh nine-month high as the US dollar retreated. Gold for February delivery settled US$6.80 or 0.4 per cent ahead at US$1,935.40 an ounce. The NYSE Arca Gold Bugs Index put on 0.88 per cent.

“A weaker dollar and soft U.S. economic data could further sweeten appetite for gold over the next few days,” Lukman Otunuga, manager, market analysis at FXTM, said.

Copper retreated as weak manufacturing gauges from the US, Europe, the UK and Australia sharpened worries about a global recession. The Judo Bank Australian manufacturing PMI sank to a 32-month low this month.

Benchmark copper on the London Metal Exchange fell 0.22 per cent to US$9,335 a tonne. Aluminium improved 0.56 per cent, nickel 0.93 per cent, lead 4.43 per cent, zinc 0.57 per cent and tin 1.39 per cent.

Battery metal miners rose for a third night. The Global X Lithium & Battery Tech ETF climbed 0.87 per cent on the New York Stock Exchange to a five-month high. The VanEck Rare Earth/Strategic Metals ETF gained 1.2 per cent.

BHP‘s US-traded depositary receipts put on 0.54 per cent. The miner’s UK listing gained 0.21 per cent. Rio Tinto added 0.3 per cent in the US and 0.5 per cent in the UK.

Trade in iron ore on the major exchanges, including China and Singapore, was suspended for Lunar New Year holidays.

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