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Futures action points to a positive start to Australian share trade as a weaker dollar helps offset profit-taking in the US.
ASX futures rallied 20 points or 0.27 per cent, signalling early gains even as Wall Street’s eight-session winning run ended. A late up-tick helped the major indices close above session lows.
A decline in the dollar offered support for Australian exporters. Oil and gold advanced. Iron ore and copper declined.
Wall Street
A “risk-off” session saw the S&P 500 sink for the first time in nine sessions and the Nasdaq Composite break its longest rising streak in almost two years.
The S&P 500 dropped 16 points or 0.35 per cent. The Dow Jones Industrial Average shed 112 points or 0.31 per cent. The Nasdaq Composite gave up 96 points or 0.6 per cent.
“Earnings season is nearly over and we’re at all-time highs,” Jay Hatfield, CEO at InfraCap Advisors, told Reuters. “It makes sense that the market would stall and maybe test some support levels.”
“It’s not ‘run for the exit’,” he added. “I just don’t see a reason to add exposure now.”
The poster boy for extreme gains in the pandemic-era bull market, Tesla, led the selling. Shares in the electric car-maker tumbled 12 per cent after CEO Elon Musk polled Twitter users over whether he should sell 10 per cent of his stake in the firm. A majority of respondents voted “Yes”, creating a potential overhang for the stock. The company’s shares have gained more than 50 per cent this year.
A downbeat outlook from PayPal weighed on the financial sector. The payments company sank 10.46 per cent after disappointing on quarterly revenue and full-year guidance.
Also weighing on lenders was a retreat in long-term interest rates as producer inflation data came in ‘hot’, but below the direst predictions. The October producer price index increased by 0.6 per month month-on-month. At 8.6 per cent, the annual pace of growth was the strongest in 11 years. However, core inflation increased by a lower-than-expected 0.4 per cent for the month, raising hopes pricing pressures may be easing.
“Core goods inflation… looks to be peaking… this is not definitive, yet, but it is encouraging, at the margin,” Pantheon Macroeconomics noted.
The yield on ten-year US treasuries fell almost six points to a seven-week low. Consumer inflation figures are due tonight.
Also affecting sentiment was the threat of upheaval at the Federal Reserve after President Joe Biden interviewed Governor Lael Brainard for the Chair’s role. Sitting Chair Jerome Powell had been widely expected to retain the role when his current term expires in February.
Australian outlook
The ASX looks set to defy weak leads from Wall Street, supported by a weaker dollar. The Aussie retreated 0.47 per cent overnight to 73.79 US cents during a “risk-off” session and as iron ore prices declined (more below).
The S&P/ASX 200 has fallen for the last two sessions in anticipation of a Wall Street reversal that has been slow to come. Ever the contrarian, the local market now looks intent on its first rise of the week. The benchmark dropped 18 points yesterday and five points on Monday.
Rate-sensitive bond proxies may have to do the heavy lifting. US financials dropped 0.55 per cent, indicating potential pressure on the big banks today if/when Australian bond yields follow their US counterparts lower. Tech stocks normally welcome lower lending rates, but sank 0.43 per cent.
US materials gained 0.43 per cent, but BHP and Rio Tinto missed the boat as ore prices struggled. Energy, real estate, utilities and consumer staples finished with gains of around 0.4 per cent.
Today’s AGM line-up includes updates from Coles, Newcrest, Beach Energy, Contact Energy, Sims, Vicinity Centres and Shaver Shop.
Monthly consumer sentiment figures are due at 10.30 am AEDT.
IPOs: a double-header today includes Green Technology Metals at 12 pm AEDT, followed by Dundas Minerals at 1.30 pm. Green Technology aims to cash in on North American demand for battery materials. It has lithium projects in Canada. Dundas is an explorer focussed on WA’s Albany-Fraser region.
Commodities
Spot iron ore prices fell back towards 18-month lows amid concerns about the health of China’s property market after the state planner met with developers. Ore landed at Tianjin declined US$1.40 or 1.5 per cent to US$92.45 a tonne.
BHP‘s US-listed stock fell 2.39 per cent and its UK-listed stock 1.47 per cent. Rio Tinto shed 1.43 per cent in the US and 0.75 per cent in the UK.
Oil climbed to a two-week high amid speculation the US may release some of its strategic reserve to alleviate price pressure at the pumps. Brent crude settled US$1.35 or 1.6 per cent ahead at US$84.78 a barrel.
Manish Raj, chief financial officer at Velandera Energy Partners, told MarketWatch any release from the Strategic Petroleum Reserve “will be seen as a desperate attempt that highlights the acute shortage of oil”.
LNG futures skidded again in the US as mild winter weather limited demand. December natural gas futures dropped 8.3 per cent to US$4.979 per million British thermal units.
Gold rose for a fourth session, supported by lingering concerns about inflation ahead of tonight’s consumer price report. Metal for December delivery settled US$2.80 or 0.2 per cent ahead at US$1,830.80 an ounce. The NYSE Arca Gold Bugs Index firmed 1.65 per cent.
Copper wilted in US trade. December copper slipped 0.6 per cent to US$4.373 a pound.
