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The share market was poised to open higher following a positive end to a losing week on Wall Street as the Federal Reserve talked tough on interest rates.
US stocks overcame early pressure on Friday to finish ahead for the first time in three sessions. Oil, copper and gold declined as China’s Covid outbreak expanded. Iron ore rallied to its highest since early August.
The S&P/ASX 200 was set to open 24 points or 0.33 per cent ahead this morning, according to futures action.
Wall Street
A choppy session saw the major indices finish near intraday highs as gains in defensive sectors helped offset pressure on energy producers.
The S&P 500 rallied 19 points or 0.48 per cent. The Dow Jones Industrial Average gained 199 points or 0.59 per cent. The Nasdaq Composite inched up a point or 0.01 per cent.
The market briefly shed its opening gains after Federal Reserve Bank of Boston President Susan Collins warned the central bank may need to hike its benchmark rate by 75 basis points next month. The market had rallied strongly in recent weeks on hopes for smaller increases after inflation data showed signs of cooling.
“I do not see clear, significant evidence that the overall inflation rate is coming down at this point,” Collins said.
“Seventy-five still is on the table; I think it’s important to say that,” she told CNBC.
The major indices struggled last week after St Louis Fed President James Bullard warned rates might go as high as 7 per cent. Bullard said this year’s increases “had only limited effects on observed inflation”.
Friday’s economic data did little to soothe worries about the risk of recession next year. House sales fell for a ninth month. October sales were 28.4 per cent lower than the same time last year.
The Conference Board’s leading economic index declined for an eighth month, prompting the board’s senior director of economic research to warn “the economy is possibly in a recession”.
For the week, the S&P 500 lost around 0.7 per cent, the Dow 0.1 per cent and the Nasdaq 1.6 per cent.
“Markets are in a bit of a holding pattern,” Lauren Goodwin, economist and portfolio strategist at New York Life Investments told Reuters.
“What is driving all equities of course is Fed policy and the gravitational force that rising interest rates have on the equity complex as a whole,” she added. “We are not likely to see any real evidence in terms of potentially declining wage pressure or inflation pressure for another couple of weeks.”
Australian outlook
The S&P/ASX 200 has a third straight advance in its sights after Wall Street shrugged off more hawkish talk from the Fed. Friday’s action suggests the central bank’s attempts to walk back rates expectations may have less impact going forward. Seasonal tailwinds should help market sentiment.
The Australian benchmark tracked sideways last week as investors awaited fresh catalysts following a big rally since early October. After surging 700 points since October 3, the index gave back six points or 0.1 per cent for the week.
Iron ore was back in favour as the ore price regained US$100 a tonne. Prices have recovered on speculation that Chinese support for the property sector will raise demand. Champion Iron rallied 15.2 per cent across the week. Fortescue Metals gained 12.4 per cent.
Lithium miners were under pressure for a second week. Core Lithium shed 16.2 per cent. Allkem lost 13.5 per cent.
US stocks broke a two-session losing run on Friday, thanks in large part to defensive gains. Utilities, real estate and healthcare were the pick of the US sectors, adding 1.2-2 per cent. Financials gained 0.77 per cent, industrials 0.71 per cent and materials 0.65 per cent.
The day’s drags included energy -0.9 per cent and communication services (Netflix, Google, News Corp) -0.35 per cent.
The Australian dollar slipped further below 67 US cents. The Aussie was this morning down 0.11 per cent at 66.66 US cents.
The domestic economic calendar lightens this week as the month winds down. A slender schedule includes: weekly consumer confidence, evening speech by RBA Governor Philip Lowe (Tuesday); and preliminary measures of manufacturing and services sector activity (Wednesday).
The global money go-round will slow from mid-week as Americans abandon their trading desks to go home for Thanksgiving. The New York Stock Exchange closes for the holiday on Thursday. Markets reopen for a short session on Friday, but participation levels will be far below normal.
The mood on Wall Street will likely continue to be restrained by the interest rates outlook. Several Federal Reserve officials are due to speak on Tuesday. The minutes from this month’s Fed meeting are released on Wednesday.
Also this week in the US: durable goods orders, unemployment benefits claims and flash manufacturing and services PMIs (Wednesday).
The last big week of the domestic AGM season brings meetings for shareholders in: Pro Medicus (today); Fortescue Metals, Star Entertainment, Liontown Resources, Monadelphous, BlueScope Steel and Brickworks (Tuesday); WiseTech, Abacus Group, Shopping Centres Australasia, Hills, Netwealth, Mesoblast and Integrated Research (Wednesday).
Thursday’s meetings include Harvey Norman, Kogan, Evolution Mining, New Hope, Ramelius, Karoon Energy, Nick Scali, Hansen Technologies, Ridley Corporation, Qube and Arena REIT. The week winds up with EML Payments, Silver Lake Resources, Regional Express, Westgold and Beston Global Food Co (source for all listings: ASA).
Technology One and Select Harvests release full-year results on Tuesday. Volpara Health releases half-year results on Wednesday. New Hope provides a quarterly trading update on Thursday.
Stocks trading ex-dividend this week include: Elders (today); Amcor, Sunland (Tuesday); and ALS, Nufarm and Macquarie Group (Thursday).
IPOs: there are three potential new listings pencilled in for the week ahead, although recent trends suggest not all will get away. They are: Tiger Tasman Minerals (12 pm AEDT today); and Toubani Resources and Lightning Minerals (Tuesday).
Commodities
Oil logged an 8.7 per cent decline for the week as traders interpreted surging Covid case numbers in China and the US Fed’s hawkish rates outlook as bad for demand. The Wall Street Journal reported a sevenfold increase in Chinese infection numbers in two weeks, prompting the State Council to warn against “irresponsible loosening” of restrictions.
Brent crude settled US$2.16 or 2.4 per cent lower on Friday at US$87.62 a barrel. The close was the weakest since September 27. The US benchmark, West Texas Intermediate, fell 1.9 per cent to its softest finish since September 30.
Copper succumbed to similar pressures, falling as other industrial metals rebounded. The metal mostly closed aligned with the strength of the global economy retreated 4.4 per cent across the week after hitting a five-month high the previous week.
“China announced some easing at the margins of their COVID policy. But the fact is, they’re heading into winter and infection rates are surging, so I can’t see these controls ending any time soon,” Tom Price, head of commodities strategy at Liberum, told Reuters
Benchmark copper on the London Metal Exchange fell 0.42 per cent to US$8,076 a tonne. Aluminium bounced 1.63 per cent, nickel 1.28 per cent, lead 0.16 per cent, zinc 1.47 per cent and tin 0.35 per cent.
Iron ore continued to resist the headwinds affecting crude and metals. Ore prices rose for a third week amid optimism recent Chinese measures to support its property market will feed demand.
“Stimulus policies have pushed up price expectations for iron ore,” Huatai Futures analysts said.
The most-traded January ore on the Dalian Commodity Exchange climbed 3.3 per cent to 753.50 yuan (US$105.76) a tonne.
BHP‘s US-traded depositary receipts edged up 0.24 per cent following a rise of 0.7 per cent in its UK listing. Rio Tinto tacked on 0.4 per cent in the US and 0.34 per cent in the UK.
US gold miners shrugged off an on-going retreat in precious metals. The NYSE Arca Gold Bugs Index rallied 0.84 per cent as gold for December delivery settled US$8.60 or 0.5 per cent lower on Friday at US$1,754.40 an ounce.
For the week, the yellow metal shed 0.9 per cent after jumping 5 per cent the week before.
“Gold is proving to be impressively resilient despite a reality check from Federal Reserve officials on the prospect of any pivot away from the bank’s series of interest rate hikes,” Rupert Rowling, market analyst at Kinesis Money, said.
