Outlook for the day: Neutral as declines in iron ore and gold partly offset gains on Wall Street.
ASX futures: up 3 points or 0.04%
Overnight themes:
US stocks rallied after the White House announced its first trade agreement since the start of the tariff war and claimed this weekend's talks with China will be "substantive".
The S&P 500 closed 0.58% higher after paring its advance in the final hour of trade. The Dow gained 254 points or 0.62%. The Nasdaq put on 1.07%.
Stocks rose as President Donald Trump announced the framework of a deal with the UK that retained a 10% baseline tariff on British imports to the US while the UK lowered its tariffs on US imports to 1.8% from 5.1%. The announcement was otherwise light on details and did not involve a signing. “The final details are being written up,” Trump said. “In the coming weeks we’ll have it all very conclusive.”
Trump also indicated he expected this weekend's talks with China to be "substantive". He also said he expects tariffs to come down from current levels. A later report by the New York Post claimed the administration planned to slash its China tariff from 145% to as low as 50 - 54% as soon as next week.
"The market is looking for an excuse to exhale and believe that we're going to get to a more reasonable outcome here than just an all-out global trade war. It did respond positively today to the announcement with the UK. Trump's a showman, and so when he said that those talks this weekend in Geneva are going to be substantive, you have to take him at his word, but you never know" - Scott Welch, chief investment officer at Certuity (per Reuters).
“There is increased optimism that deals can be made before the July 9 expiration of the reciprocal pause. However, the initiation of talks could ease pressure on the administration to finalize agreements with other trade partners in the short term” - CFRA chief investment strategist Sam Stovall (per CNBC).
Domestically-focussed small caps outperformed. The Russell 2000 index jumped 1.85% as traders bought companies seen as best placed to benefit from a reduction in tariffs.
Boeing popped 3.31% after Commerce Secretary Howard Lutnick suggested the US-UK trade will include the UK buying US$10 billion of aircraft.
Two-thirds of S&P sectors advanced, led by consumer discretionary +1.35%, industrials +1.34% and energy +1.26%. The materials sector firmed 1.2%. Financials rose 0.71%.
Traditional defensive sectors declined as risk appetite lifted and treasury yields rose. Health dropped 0.91%, utilities 0.86%, real estate 0.54% and consumer staples 0.49%.
Iron ore sank after the China Iron and Steel Association said Chinese authorities were moving ahead with plans to cap steel output to reduce over-capacity in the industry. Benchmark ore futures declined 2.73% on the Dalian Commodity Exchange in daytime trade to US$95.82 a metric ton. The Singapore ore benchmark dropped 1.95% to US$96.40.
"It's mainly resumed expectations of steel output cuts that are driving the market movement with price fall of steelmaking ingredients more dramatic than that of steel... This saying from the steel association has reinforced such expectations. Moreover, hot metal output is set to brace a peak soon" - Zhuo Guiqiu, analyst at broker Jinrui Futures (per Reuters).
Copper reversed initial losses following reports US tariffs on China could fall by half as soon as next week. US officials were reported to be debating cutting the tariffs from 145% to 50 - 54% as negotiations with Beijing advance. Benchmark copper firmed 0.58% on the London Metal Exchange to US$9,474.50 a metric ton.
Gold dropped more than 2% as progress on trade deals boosted the US dollar and undermined demand for havens. The US dollar index was lately up more than 1% after the White House unveiled a deal with the UK. Gold futures settled US$79.90 or 2.5% lower at US$3,306 an ounce. The spot price was lately own US$71.45 or 2.12% to US$3,304.74.
Oil rebounded on hopes this weekend's US-China trade talks will loosen what is effectively an embargo on each others' goods. Brent crude settled US$1.72 or 2.81% higher at US$62.84 a barrel, reversing the previous day's fall.
Key events today:
QBE AGM - 10 am AEST
S&P 500: up 33 points or 0.58%
Dow: up 254 points or 0.62%
Nasdaq: up 190 points or 1.07%
VIX: down 4.54% to 22.48
US 10-year treasury yield: up 11 points to 4.384%
Dollar: down 0.45% to 64.02 US cents
Iron ore (Dalian): down 2.73% to US$95.82
Brent crude: up US$1.72 or 2.81% to US$62.84
Gold (futures): down US$79.90 or 2.5% to US$3,306
Gold (spot): down US$71.45 or 2.12% to US$3,304.74
Silver (spot): down 1 US cent or 0.02% to US$32.45
Palladium (spot): up US$8.50 or 0.88% to US$973.50
Antimony (China ore): down 0.29% to US$25,972
NYSE Arca Gold Bugs: down 2.71%
Bitcoin: up 5.69% to US$102,289
Copper (LME): up 0.58% to US$9,474.50
Nickel (LME): down 0.03% to US$15,575
Lithium carbonate (China spot battery grade): down 2.39% to 7,956 yuan
Global X Lithium & Battery Tech ETF: up 1.82%
Uranium (spot): steady at US$69.50
Global X Uranium ETF(URA): down 0.34%
BHP: down 0.41% (US); down 1.04% (UK)
