Aussie shares look set to open cautiously higher after Wall Street trimmed sharp initial losses following disappointing retail sales and fresh pandemic restrictions.
ASX SPI200 index futures edged up eight points or 0.1 per cent, signalling a positive open shy of yesterday’s eight-and-a-half-month high.
Wall Street
US stocks retreated from Monday’s all-time highs, but finished well above session lows. The Dow Jones Industrial Average ended with a loss of 167 points or 0.56 per cent after falling as much as 430 points.
The S&P 500 followed a similar trajectory to a final deficit of 17 points or 0.48 per cent. The Nasdaq Composite was positive for much of the afternoon before closing 25 points or 0.21 per cent in the red.
A market in need of a breather after more than two weeks of frantic action found an excuse in disappointing data. Economists’ expectations for October retail sales proved over-optimistic: sales increased by 0.3 per cent, versus the 0.5 per cent predicted by economists polled by Reuters.
The data miss compounded concerns about the outlook for the economy after California, New Jersey and Iowa announced restrictions to contain spiralling Covid-19 infections. Federal Reserve Chair Jerome Powell welcomed recent vaccine news but said “the next few months may be very challenging”.
Politicians continued to inch towards a second fiscal stimulus package. Senate Majority Leader Mitch McConnell said he was open to a US$500 billion package, but had not had formal discussions with House Democrats or the Biden team.
“We just reached new highs, so it’s natural for the market to take a breather, and the slightly disappointing read on the retail sales front is facilitating that,” Chris Larkin, managing director of trading and investing product at E*TRADE, said. “And without stimulus checks coming in, there’s a bit of uncertainty in this sector in the short term.”
Medicine retailers tumbled after Amazon announced a new online pharmacy. Dow component company Walgreens Boots Alliance dropped 9.6 per cent and CVS Health 8.6 per cent. Amazon climbed 0.15 per cent.
Australian outlook
The ASX largely pre-empted overnight weakness in the US, retreating more than 30 points from yesterday’s session high as futures signalled a looming retreat. That gives the local market a cushion this session.
Buying interest remains robust. Barring Monday’s technical hitch, trading volumes have been well above trend over the last week. It will likely take heavier falls in the US to trigger a genuine retrace. That said, some modest profit-taking today would not be surprising.
The rotation from growth stocks into value/cyclical plays stuttered overnight in the US. Materials fell 0.4 per cent, industrials 0.3 per cent and financials 0.2 per cent. The only sectors to resist the downtrend were real estate +0.1 per cent and energy +0.5 per cent..
A busy week for the Reserve Bank continues with Governor Philip Lowe’s participation in a virtual panel discussion about the post-Covid recovery. The event starts at 9 am AEDT. Aristocrat Leisure, Serko and Volpara Health were scheduled to released earnings today.
The dollar retreated from yesterday’s highs, easing 0.22 per cent to 73.03 US cents.
Commodities
Gold stocks retreated after the metal declined for the first time in four sessions. The NYSE Arca Gold Bugs Index dipped 1.1 per cent. Gold for December delivery settled $2.70 or 0.1 per cent weaker at US$1,885.10 an ounce. Silver slid 0.6 per cent.
Oil eased a fraction after an OPEC+ committee meeting disappointed traders expecting a recommendation on next year’s production. Brent crude settled 7 cents or 0.2 per cent lower at US$43.75 a barrel.
“They appear to be playing a game of wait and see,” Matt Smith, director of commodity research at ClipperData, told MarketWatch. “We expect OPEC+ to maintain current cuts and not taper in January.”
Iron ore continued to defy predictions of a looming retrace as supply catches up with demand. The spot price for ore landed in China climbed $2.15 or 1.7 per cent to US$126.15 a tonne.
A broadly negative night session for miners saw BHP‘s US-listed stock lose 0.44 per cent and its UK-listed stock 1.5 per cent. Rio Tinto added 0.14 per cent in the US after losing 0.73 per cent in the UK.
Aluminium climbed 1.7 per cent on the London Metal Exchange to US$1,961 a tonne, its highest level in almost two years. Copper eased 0.6 per cent to US$7,047 a tonne. Nickel put on 0.3 per cent, lead and tin 1.5 per cent, and zinc 0.5 per cent.