Outlook for the day: Negative after US stocks gave up early gains, and China growth worries and a rally in the greenback weighed on commodity prices.
ASX futures: down 33 points or 0.43%
Overnight themes:
US stocks surrendered strong initial gains as megacap tech stocks sold off. Market commentators blamed market jitters after an auction of US treasuries attracted weak demand.
The S&P 500 finished 0.77% in the red after earlier rising as much as 1.73%. The Nasdaq Composite flipped a 2% opening rally into a final loss of 1.05%. Similarly, a 480-point surge in the Dow faded to a loss of 234 points or 0.6%.
Rate-sensitive tech stocks rolled over as treasury yields climbed. Nvidia dropped 5.12%, Tesla 4.43% and Meta 1.05%.
The overnight reversal continued the market's wild run since an unexpected rate rise in Japan last week. The Nasdaq and S&P 500 lost more than 3% on Monday as the yen carry trade unravelled, and soft US jobs figures stoked recession fears. The major indices then bounced between 0.76% and 1.04% on Tuesday.
"You don't just have the fall we had on Monday and it's done. You typically test the lows again before we can move out of this downtrend" - Lindsey Bell, chief strategist at 248 Ventures.
US stocks opened strongly last night after the Bank of Japan tried to calm the market by stating it would not raise rates while financial markets were unstable. The comments helped Japan's Nikkei 225 index rise for a second day yesterday following Monday's 12.4% plunge, the Japanese market's worst session since 1987.
A mixed US market saw gains for the S&P utilities sector, energy, financials and consumer staples. The damage to the indices was done by consumer discretionary -1.44%, materials -1.39%, tech -1.36% and health -1.07%.
Iron ore fell for a second session following a decline in Chinese steel production reported earlier in the week. Steel output contracted 1.2% last week from the week before, according to Mysteel. Benchmark ore futures dropped 2.4% in China in daytime trade yesterday.
“It’s difficult to see a substantial upward drive [in ore prices] amid a persistent downturn in the steel market” - analysts at First Futures (per Reuters).
Copper slumped after the London Metal Exchange reported warehouse inventories at their highest since 2019, and Chinese trade figures showed copper imports declined 2.9% last month from the prior corresponding period. LME copper dropped almost 2%. Nickel and most other base metals also fell.
A decline in US crude inventories helped lift oil prices. Brent crude bounced 2.4% after the US Energy Information Administration reported a 3.7 million contraction in US stockpiles last week.
“It’s been another bullish day for global crude prices as they continue to work their way back from steep losses charted Friday-Monday. That’s connected to broader market conditions, where traders appear to be pulling back from some of the recession fears that caused volatility to spike to start the week” - Robbie Fraser, manager of global research and analytics at Schneider Electric (per MarketWatch).
Key events today:
Speech by RBA Governor Michele Bullock - 12.40 pm AEST
US unemployment benefit claims - tonight
S&P 500: down 41 points or 0.77%
Dow: down 234 points or 0.6%
Nasdaq: down 171 points or 1.05%
Dollar: up 0.1% to 65.2 US cents
Iron ore (Dalian): down 2.41% to US$104.30
Brent crude: up US$1.85 or 2.4% to US$78.33
Gold: up 80 US cents or 0.03% to US$2,432.40
Silver: down 28 US cents or 1.03% to US$26.94
NYSE Arca Gold Bugs: down 3.23%
Bitcoin: down 2.2% to US$55,197
Copper (LME): down 1.99% to US$8,750.50
Nickel (LME): down 1.49% to US$16,200
Lithium carbonate (China futures): down 0.12% to US$11,256
Global X Lithium & Battery Tech ETF: down 0.72%
Uranium (spot): up 0.36% to US$82
BHP: down 1.42% (US); up 0.48% (UK)
