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Futures trading points to early gains for Australian stocks following a mixed session on Wall Street after robust jobs data supported further rate hikes.
Oil and gold fell for a second day. Iron ore and copper rose. The dollar was little changed, just below 66 US cents.
The S&P/ASX 200 will open 32 points or 0.44 per cent higher, according to an overnight rise in the SPI 200. The ASX 200 slumped 0.77 per cent yesterday after the Federal Reserve warned US rates were likely to go higher than markets had priced in.
Wall Street
Wall Street’s main indices finished mixed after strong readings on private payrolls and job vacancies underscored the risk of another knockout employment report tomorrow night. With the Fed struggling to contain inflation, investors fear a strong February jobs report will force the central bank to hike its benchmark rate by half a percentage point.
The S&P 500 finished a choppy session six points or 0.14 per cent higher. The Dow Jones Industrial Average shed 58 points or 0.18 per cent. The Nasdaq Composite swung to a late gain of 46 points or 0.4 per cent.
Jobs data did nothing to quell fears of a return to jumbo rate hikes this month. Private-sector payrolls increased a stronger-than-expected 242,000 last month, according to payroll services firm ADP. Economists polled by The Wall Street Journal had anticipated a gain of 205,000 jobs.
A separate report showed job vacancies contracted in January, but not by enough for a central bank battling to contain the worst inflation outbreak in 40 years. Job openings eased from 11.2 million in December to 10.8 million in January. That still leaves almost two vacancies for every unemployed worker.
“The labor market remains extremely tight despite 450 basis points of rate hikes in the last year,” Ronald Temple, chief market strategist at Lazard, wrote. “Friday’s employment report will give us more insight into the degree of tightness in the labor market, but this report [job openings] adds weight to the Chair Powell’s comments yesterday suggesting a 50-basis point rate hike on March 22 could be in the cards.”
Overnight, Powell told the House Financial Services committee the bank has not decided on the size of this month’s rate hike.
“We have not made any decision about the March meeting. We’re not going to do that until we see the additional data,” Powell said.
“We will be guided by the incoming data and the evolving outlook,” he added.
Wall Street’s main indices were coming off their worst session in about two weeks. The S&P 500 tumbled 1.53 per cent on Tuesday night after Powell told a House committee interest rates would likely have to go higher than previously anticipated.
Market pricing suggests the odds on a 50 bps rate hike this month have risen to 77.9 per cent from 23 per cent before Powell’s comments. The yield on two-year US treasuries reached 5 per cent for the first time since 2007.
Australian outlook
Futures action suggests investors are ready to move on from yesterday’s US rates scare. The S&P/ASX 200 slumped 57 points or 0.77 per cent yesterday as markets adjusted to the prospect of a higher top in US rates.
The Australian rates outlook appears significantly brighter after the RBA hinted it may pause after one more hike. That difference in expectations will depress the dollar, but could see Aussie stocks outperform in the short term.
The dollar attempted to recover overnight from Tuesday night’s 2 per cent plunge, but was lately only modestly higher, up 0.11 per cent at 65.94 US cents. Earlier, the Aussie traded as high as 66.3 US cents.
A modest easing in yields helped the US’s most highly-geared sectors rebound. Real estate led with a rise of 1.32 per cent. Tech gained 0.84 per cent.
Also higher were utilities +0.78 per cent, materials +0.47 per cent and industrials +0.23 per cent. The night’s drags included energy -1.02 per cent and financials -0.41 per cent.
This morning’s ASX futures figure may prove optimistic considering the number of major companies trading ex-dividend today. Two of the index’s three largest companies by market capitalisation trade today without their next dividends.
Larger names trading “ex-“ include BHP, CSL, Rio Tinto, South32, ASX Ltd, Mineral Resources, Perpetual, Monadelphous, IDP Education and G8 Education.
China releases inflation data at 12.30 pm AEDT.
Two initial public offerings originally pencilled in for today and tomorrow (Northstar Energy and Evergreen Lithium) have been pushed back. New listing dates have yet to be set.
Commodities
Iron ore rose for a second day after data earlier this week showed increases in Chinese ore imports and steel production. Customs data showed Chinese ore imports were 7.3 per cent higher year-on-year in the first two months of this year. Steel output expanded by 5.16 per cent between February 21 and 28 from the previous ten-day period, according to the China Iron and Steel Association.
The most-traded May ore futures contract on China’s Dalian Commodity Exchange added to Tuesday’s 1.34 per cent advance with a rise of 0.83 per cent in daytime trade to 912 yuan (US$130.95) a tonne.
BHP and Rio Tinto rose in overseas trade. BHP‘s US-traded depositary receipts lifted 1.67 per cent. The miner’s UK listing added 1.27 per cent. Rio Tinto gained 1.35 per cent in the US and 1.12 per cent in the UK.
Oil declined for a second session, even as US stockpiles showed their first drawdown in 11 weeks. The Energy Information Administration said US crude inventories declined by 1.7 million barrels last week, ending a run of ten straight weekly increases.
Brent crude settled 63 US cents or 0.8 per cent lower at US$82.66 a barrel.
A mixed night on the London Metal Exchange saw gains for copper, zinc and lead, while other metals declined. Metal prices slumped on Tuesday night after Fed Chair Powell’s hawkish rates outlook lit a rocket under the US dollar.
Benchmark copper bounced 1.1 per cent on the LME to US$8,859.50 a tonne. Zinc gained 0.95 per cent. Lead inched up 0.07 per cent. Aluminium lost 0.05 per cent, nickel 0.83 per cent and tin 2.37 per cent.
Gold finished modestly lower, pressured by strength in the greenback. Gold for April delivery settled US$1.40 or 0.1 per cent lower at US$1,818.60 an ounce. The NYSE Arca Gold Bugs Index shed 0.58 per cent.
Battery metal miners steadied near a two-month low. The Global X Lithium & Battery Tech ETF edged up 0.19 per cent on the New York Stock Exchange.
