Aussie stocks set their sights on a third straight advance as rebounds in commodity prices help offset a mixed close on Wall Street following weak Chinese and US economic signals.
Gains in iron ore, crude oil and metals helped lift ASX futures 23 points or 0.32 per cent. The rally pointed the S&P/ASX 200 towards a third rise for the first time in four weeks.
The S&P 500 and Nasdaq Composite gave up initial gains in late, choppy action. The Dow clung on to a slim advance of less than 0.1 per cent.
US stocks seesawed between gains and losses as weak economic data underlined the fragility of the global economy.
The Dow Jones Industrial Average finished 27 points or 0.08 per cent ahead. The S&P 500 faded in the final hour to a loss of 16 points or 0.39 per cent. The Nasdaq Composite shed 142 points or 1.2 per cent as growth stocks continued to underperform.
Stocks opened in the red after Chinese data yesterday highlighted the impact of Covid lockdowns. Chinese economic activity cooled sharply in April, fuelling contractions in retail sales and factory output.
Adding to worries, a measure of manufacturing activity in New York state unexpectedly turned negative this month. The Empire State business conditions index plunged 36.2 points to -11.6. The fall was much more severe than the dip to 16.5 anticipated by economists.
Former Federal Reserve Chair Ben Bernanke warned the US could be sliding into “stagflation” for the first time since the 1970s. Stagflation combines high inflation with stagnant economic growth. The combination challenges traditional monetary policy levers, because tackling one problem tends to exacerbate the other.
Goldman Sachs Senior Chair Lloyd Blankfein said there was a “very, very high risk” of a US recession. The bank cut its US growth predictions to 2.4 per cent from 2.6 per cent this year and to 1.6 per cent from 2.2 per cent next year.
“The S&P 500 is still trading as though it’s experiencing a growth scare, a framework that has been pointing to downside in the S&P 500 to ~3,850,” RBC Capital Markets strategist Lori Calvasina wrote. “Current trends in economic forecasts continue to support the idea that this is the right way to think about how far stocks should fall.”
The S&P 500 closed this morning at 4,008 after trading close to 3,850 last week. The broadest of the three major indices has retreated 16.3 per cent from its January high. The Dow is down 12.3 per cent and the Nasdaq more than 27 per cent from their highs.
Energy was the best of the sectors as US pump prices traded at a record. Occidental Petroleum climbed 5.68 per cent, Marathon Oil 3.63 per cent and Chevron 3.06 per cent.
Twitter slumped 8.18 per cent after Elon Musk said his takeover plans were on hold. Tesla sank 5.88 per cent. Atlassian slid 6.3 per cent during a soft session for cloud computing companies.
Last week’s late burst of buying interest seems to have survived yesterday’s grim Chinese economic data. Commodity investors were willing to look past the reports, focussing instead on the easing of Covid restrictions in Shanghai. In other words, last month’s data was dismissed as backward-looking, whereas the lifting of restrictions pointed to future recovery.
Advances in iron ore, crude and metals bodes well for the commodity-heavy S&P/ASX 200. The index will start the day on a two-session winning run for the first time since April. Rises of 134 points on Friday and 18 points yesterday suggest optimism is creeping back into the market after four weeks of losses.
The dollar climbed 0.31 per cent to 69.69 US cents.
Energy and health spearheaded US sector gains, rising 2.62 and 0.69 per cent, respectively. Beyond those, the tone was broadly defensive – consumer staples and utilities were the only other sectors to advance. The three growth sectors all declined.
Financials retreated 0.78 per cent as long-term interest rates continued to back off this month’s multi-year highs. Materials finished 0.19 per cent lower.
Back home, the minutes from this month’s Reserve Bank policy meeting were scheduled for release at 11.30 am AEST. James Hardie releases Q4 results this morning.
Iron ore and industrial metals rebounded after Shanghai mapped out plans to reopen. Ore prices were bolstered by reports of a decline in portside inventories.
The most-traded contract on the Dalian Commodity Exchange rallied 3.9 per cent to US$122.80 a tonne. The spot price for ore landed in northern China climbed US$1.57 or 1.2 per cent to US$132.50 a tonne.
“Falling Australian and Brazilian iron ore shipments and arrivals into China week-on-week should provide modest support for fragile sentiment,” Atilla Widnell, managing director at Navigate Commodities, told Reuters.
Chinese measures to support its struggling property market stoked interest in base metals. Authorities cut mortgage interest rates for some buyers.
Benchmark copper on the London Metal Exchange rose 0.8 per cent to US$9,255.50 a tonne. Aluminium improved 1.5 per cent, lead 1.6 per cent, zinc 2 per cent and tin 1.3 per cent. Nickel dropped 2.7 per cent,
Rio Tinto rallied 1.15 per cent in the US and 0.36 per cent in the UK. BHP‘s US-traded depositary receipts dipped 0.11 per cent after its UK stock shed 0.73 per cent.
Oil overcame early weakness as tightening US supplies added to optimism over China easing Covid restrictions. Brent crude settled US$2.69 or 2.4 per cent higher at US$114.24 a barrel. The US benchmark moved close to parity, rising 3.4 per cent to US$114.20.
Gold finished higher after testing US$1,800 an ounce. Metal for June delivery settled US$5.80 or 0.3 per cent ahead at US$1,814. The NYSE Arca Gold Bugs Index firmed 0.63 per cent.