Outlook for the day: The ASX 200 looks set to reverse yesterday's falls, which came as US stock futures pointed to a much weaker session on Wall Street than eventuated overnight. The prospect of an interest rate cut this afternoon should support buying interest.
ASX futures: up 73 points or 0.88%
Overnight themes:
US stocks shrugged off early losses as treasury yields fell back after spiking following news late on Friday of a downgrade for US debt.
The S&P 500 reversed an early fall of around 1% for a gain of 0.09%, marking the index's sixth straight advance. The Nasdaq Composite squeezed out a gain of 0.02%. An 8.21% rebound in battered insurer UnitedHealth helped the Dow swing from an opening loss of more than 300 points to a final gain of 137 points or 0.32%.
Stocks opened underwater after ratings agency Moody's stripped the US of its coveted triple-A credit rating late on Friday, citing rising government debt. The agency downgraded US sovereign credit to Aa1 from Aaa, mirroring similar downgrades in past years by S&P and Fitch. The announcement fuelled an initial "Sell America" flight from US bonds, the dollar and stocks. The 10-year treasury yield climbed above 4.5%, a level that prompted President Donald Trump to pause his tariff plans last month. The 30-year yield cracked 5% for the first time since April. The US dollar index declined more than 0.7%.
The stock market recovery came as the initial spike in yields subsided. The 10-year yield was this morning back at 4.454%.
“The Moody’s report didn’t highlight anything that every investor doesn’t already know about the U.S. fiscal situation. To me, it just kind of provided a little bit of cover for the market to take a breather here, but nothing that structurally changes our bullishness on where we think we’ll be in the next six to 12 months” - Ross Mayfield, investment analyst at Baird (per Reuters).
Also helping market sentiment: news that President Trump's tax bill secured approval from the House Budget Committee on Sunday, clearing the way from the bill to advance in Congress. The bill had stalled for several days amid Republican demands for deeper spending cuts.
Health +0.96% and consumer staples +0.42% were the pick of the S&P sectors during a night of modest moves. Industrials, utilities and materials all gained more than 0.3%. Financials closed flat. Energy was the only significant drag, falling 1.55%.
Gold rebounded from its worst week since November after Moody's US credit downgrade fuelled a broad retreat from US assets, including the dollar, bonds and - initially - stocks. The US dollar index dropped more than 0.7%, reducing the cost of dollar-denominated commodities for buyers using other currencies.
Gold futures settled US$46.30 or 1.5% higher at US$3,233.50 an ounce. The spot price was lately up US$26.14 or 0.82% to US$3,229.93.
Iron ore declined after April data showed China's industrial output and retail sales lost momentum as the trade war with the US cooled activity. Benchmark iron ore dropped 0.89% on the Dalian Commodity Exchange to US$100.15 a metric ton. Singapore's ore benchmark fell 0.6% to US$99.45.
Weakness in the US dollar helped copper resist selling pressure on the London Metal Exchange. Benchmark copper firmed 0.73% to US$9,516 a metric ton, even as most other industrial metals lost ground.
Oil nudged higher as US-Iran nuclear negotiations once again hit a roadblock, reducing the likelihood of Washington lifting sanctions on Iranian crude. Talks were on the verge of breaking down over the issue of uranium enrichment. Brent crude settled 13 US cents or 0.2% ahead at US$65.54 a barrel.
Key events today:
Earnings: TNE
AGM: VEA
RBA interest rate announcement - 2.30 pm AEST
RBA press conference - 3.30 pm
S&P 500: up 5 points or 0.09%
Dow: up 137 points or 0.32%
Nasdaq: up 4 points or 0.02%
VIX: up 5.22% to 18.14
US 10-year treasury yield: down 3 points to 4.454%
Dollar: up 0.75% to 64.57 US cents
Iron ore (Dalian): down 0.89% to US$100.15
Brent crude: up 13 US cents or 0.2% to US$65.54
Gold (futures): up US$46.30 or 1.5% to US$3,233.50
Gold (spot): up US$26.14 or 0.82% to US$3,229.93
Silver (spot): up 8 US cents or 0.24% to US$32.35
Palladium (spot): up US$13.50 or 1.4% to US$975.50
Antimony (China ore): down 1.02% to US$25,165
NYSE Arca Gold Bugs: up 2.15%
Bitcoin: up 1.28% to US$105,419
Copper (LME): up 0.73% to US$9,516
Nickel (LME): down 0.67% to US$15,500
Lithium carbonate (China spot battery grade): down 1.29% to 7,801 yuan
Global X Lithium & Battery Tech ETF: down 0.98%
Uranium (spot): steady at US$71.25
Global X Uranium ETF(URA): up 0.36%
BHP: down 0.32% (US); down 0.5% (UK)
