Australian shares were poised to open higher as commodity gains and reports of progress in Ukraine-Russia peace talks help offset falls on Wall Street.
ASX futures rallied 20 points or 0.28 per cent, signalling early relief following last week’s 0.7 per cent slide.
Oil, copper, aluminium and wheat rose. Iron ore, gold, silver and palladium declined.
US and European equity market futures rebounded overnight on reports of “substantial progress” in negotiations between Russia and Ukraine.
Wall Street
The Dow fell to a fifth straight weekly loss as the conflict in Ukraine continued to depress risk appetite and as US investors reduced their exposure ahead of a likely rate rise this week.
TheS&P 500faded 55 points or 1.3 per cent. The Dow Jones Industrial Average gave up 230 points or 0.639 per cent. The Nasdaq Composite shed 286 points or 2.18 per cent.
“You just don’t know what you are going to see so there’s no reason to go into the weekend with a risk-on attitude,” Peter Tuz, president of Chase Investment Counsel, told Reuters.
Rate-sensitive growth stocks led declines ahead of a two-day Federal Reserve meeting. The US central bank is expected to increase its target rate for the first time since 2018. The three sectors dominated by “Big Tech” (I.T., communication services and consumer discretionary) lost around 1.8 – 1.9 per cent.
The main indices opened higher after Russian President Vladimir Putin described “positive” shifts in peace negotiations in Ukraine. Stocks turned negative after Ukraine’s foreign minister said he had seen no evidence of progress.
US, European and Asian futures rebounded this morning following upbeat feedback from both sides following weekend negotiations. The Russian delegate said there had been “substantial progress” which could lead to a joint position and the signing of documents “in the coming days”. Ukraine’s lead negotiator said, “I think that we will achieve some results literally in a matter of days.”
Dow futures bounced 0.6 per cent, according to IG Markets. Hong Kong and German futures gained 0.7 per cent.
Friday’s fall sealed a weekly loss of 2 per cent for the Dow. The blue-chip average’s five-week losing run is the longest in almost three years. The S&P 500 lost 2.9 per cent for the week and the Nasdaq 3.5 per cent.
“The S&P 500′s -12% decline from its peak suggests much of the froth has been taken out,” Savita Subramanian, equity strategist at Bank of America Securities, said. “Stocks are largely pricing in the geopolitical shock, where the S&P 500 fell 9% from peak-to-trough since Russia-Ukraine headlines in early Feb, similar to a typical 7-8% fall in prior macro/geopolitical events.”
Australian outlook
Positive developments over the weekend hint at a stronger start to the week than Saturday morning’s ASX futures reading indicates. A headline-driven market may seize on reported progress in Russia-Ukraine peace talks, especially if US futures hold their gains.
The dollar jumped 0.7 per cent this morning to 72.94 US cents, a typical sign of improved risk appetite.
On Friday, the S&P/ASX 200 skidded 67 points or 0.74 per cent. Growth stocks led the retreat and may be in the firing line again this session after the big three US growth sectors declined 1.8 – 1.9 per cent.
While all 11 US sectors fell, utilities, financials and materials fared best with losses of less than 0.8 per cent.
Miners provided most of last week’s biggest gains on the ASX, even as commodity markets turned choppy. Uranium miner Paladin Energy and gold miners St Barbara, Gold Road Resources and Silver Lake Resources all gained at least 11 per cent.
Holidays in several states will cap trading volumes today. It is Labour Day in Victoria and Tasmania, Adelaide Cup Day in South Australia and Canberra Day in the ACT.
Dividend payouts will continue as a headwind, but the effect is likely to be lighter than last week. Among those going ex-dividend before Friday’s close are News Corp, Sandfire Resources, TPG Telecom, Inghams, Austal, HUB24, Carsales.com and Chorus.
Thursday’s employment report looms as the most important event on the domestic economic calendar. Economists anticipate another drop in the jobless rate to 4.1 per cent after the economy created around 40,000 jobs last month.
The release tomorrow of the minutes from this month’s RBA meeting will also generate interest. Also due this week: quarterly house price index, weekly consumer confidence (Tuesday); and the Melbourne Institute’s leading index of economic indicators (Wednesday).
The week ahead on Wall Street is dominated by a Fed meeting that will produce the first US rate hike since 2018. While there may be some market nerves leading into the Wednesday night announcement, an increase of 25 basis points seems to be a lock.
IPOs: another slim week coming up. The ASX lists four potential debutants this week. Many Peaks Gold and Pure Resources are currently slated for Wednesday. Equity Story Group and Pinnacle Minerals are scheduled for Friday. As always, listings are subject to change.
Commodities
Oil rose at the end of a volatile week that brought a 14-year high and the biggest one-day decline in two years. Brent crude climbed US$2.41 or 2.2 per cent to US$111.74 a barrel. For the week, the global benchmark lost more than 5 per cent.
Prices recovered on Friday amid speculation a US ban on Russian oil will have minimal impact on overall supply dynamics.
“A unilateral ban on Russian imports means that Russian barrels that would have normally been purchased by the U.S. could still find another buyer on the global market, which would leave the global supply and demand balance largely unchanged and allow U.S. buyers to source the supply from elsewhere,” Troy Vincent, senior market analyst at DTN, told MarketWatch.
Gold declined as traders monitored signs of progress in Russia-Ukraine ceasefire negotiations. Gold for April delivery settled US$15.40 or 0.8 per cent weaker at US$1,985 an ounce. The NYSE Arca Gold Bugs Index eased 1 per cent.
Silver declined 0.4 per cent. Palladium extended its weekly loss beyond 6 per cent with a decline of 4.2 per cent.
Wheat futures trimmed a losing week with a rise of 1.79 per cent to US$11.065 per bushel. Prices slid 8.4 per cent last week after reaching a record.
Aluminium steadied after a sharp retrace from record levels. Benchmark aluminium on the London Metal Exchange firmed 1.62 per cent to US$3,483 a tonne. Prices fell around 10 per cent over the week after the Russian invasion of Ukraine pushed prices as high as US$4,073.50.
“There is across commodities markets some confusion about where prices should be,” WisdomTree analyst Nitesh Shah told Reuters.
Copper rose 0.66 per cent. Tin added 0.8 per cent. Lead dropped 1.29 per cent and zinc 1.24 per cent.
BHP and Rio Tinto fell with iron ore.The spot price for ore landed at Tianjin declined US$1.85 or 1.2 per cent to US$154.50 a tonne.
BHP‘s US-traded depositary receipts dropped 3.74 per cent. The miner’s UK listing shed 1.05 per cent.Rio Tinto fell 2.85 per cent in the US after gaining 1.18 per cent in the UK.
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