The share market looked set to open modestly lower after the Dow logged its longest run of weekly losses since 1932 and Australians voted for a change of government.
ASX futures dropped 15 points or 0.21 per cent ahead of Saturday’s federal election.
As the counting of votes continued this morning, analysts suggested Labor leader Anthony Albanese was on track to secure an outright majority, avoiding the uncertainty of a hung parliament.
US stocks finished little changed on Friday after the S&P 500 dropped briefly into bear market territory. Iron ore, oil, gold and copper edged higher. The dollar firmed above 70 US cents.
Wall Street
Friday’s headline figures disguise another wild ride for investors as the S&P 500‘s decline from its January high surpassed 20 per cent. The index fell as much as 2.3 per cent before late buying lifted it to a final gain of 0.57 points or 0.01 per cent.
The Dow Jones Industrial Average eked out a rise of nine points or 0.03 per cent. The Nasdaq Composite trimmed its loss to 34 points or 0.3 per cent.
The S&P 500’s fall from its January record reached 20.9 per cent during the session. The index closed roughly 19 per cent from its high, narrowly avoiding the standard definition of a bear market: a close 20 per cent from a peak.
For the week, the index lost 3 per cent. The Nasdaq Composite shed 3.8 per cent and the Dow 2.9 per cent. The Dow’s eight-week losing streak is the longest since the Great Depression. The S&P 500 and Nasdaq have both fallen for seven weeks, their worst runs since the dotcom bust of 2001.
The growth stocks that spearheaded this year’s declines continued to fall last week, but selling broadened into the retail sector following weak earnings from Walmart and Target. Discount clothing retailer Ross Stores plunged 22.47 per cent on Friday after cutting its sales forecast.
“This week’s decline felt as if the market was starting to recognize that earnings growth and S&P 500 profitability may be in jeopardy as inflation will continue to be higher throughout the year,” David Wagner, portfolio manager at Aptus Capital Advisors, wrote.
Two bellwether stocks for the global economy booked heavy falls. Heavy machinery manufacturers Caterpillar and Deere dropped 4.32 and 14.07 per cent after the latter’s Q1 revenue fell short of expectations. The problem? Inflation and supply-chain issues, a recurring theme this reporting season.
Tesla sank 6.42 per cent following accusations of sexual harassment against Elon Musk. The electric carmaker’s chief executive denied the allegations.
Apple led the intraday market reversal, reversing to a gain of 0.17 per cent after earlier falling more than 2 per cent. Facebook owner Meta Platforms gained 2.21 per cent.
Australian outlook
The S&P/ASX 200 showed no pre-election nerves, surging 1.15 per cent on Friday after China cut a key lending rate. That news handed Wall Street a positive start before an all-too-familiar sell-off. A late recovery suggests value-hunters were waiting for the S&P 500 to reach bear market territory.
This morning’s ASX futures reading does not take into account the outcome of the federal election (futures trading finished on Saturday morning) and cannot therefore be considered a reliable guide to the day ahead. With neither party offering significant change, the one thing the market wanted was a clear result.
The situation remained fluid this morning. Anthony Albanese will certainly take power, but at time of writing had not secured an outright majority. If Labor falls short of 76 seats, it will need the support of the crossbench to pass legislation. That uncertainty may temper buying interest this morning.
Returning to Friday’s US action, energy and defensive sectors were the session’s best performers. Healthcare and real estate both added around 1.2 per cent. Energy gained 0.43 per cent. Utilities and consumer staples both put on 0.27 per cent.
Retailers remained under pressure: the consumer discretionary sector shed 1.53 per cent. Materials dipped 0.22 per cent and financials 0.12 per cent.
Turning to the week ahead, the Reserve Bank rolls out a pair of officials after raising rates this month for the first time in 11 years. Assistant Governor Christopher Kent will discuss quantitative tightening at a Sydney summit today. Luci Ellis, Assistant Governor with a focus on economics, is due to address the Urban Development Institute’s National Congress on Wednesday.
The domestic economic calendar brings weekly consumer confidence and monthly manufacturing and services surveys tomorrow, quarterly construction work data on Wednesday, quarterly private capital expenditure on Thursday and monthly retail sales on Friday.
In the US, Federal Reserve Chair Jerome Powell is due to address an economic summit on Tuesday night. Given current market sensitivities to the rates outlook, that event may prove the most significant of the week ahead.
Also this week on Wall Street: flash manufacturing and services data (Tuesday); durable goods orders, minutes from the last Fed meeting (Wednesday); preliminary GDP (Thursday); and consumer price index (Friday).
Back home, the May mini AGM season winds down this week with meetings for shareholders in Viva Energy (Tuesday); Costa Group, Alumina, Boart Longyear (Wednesday); and Appen (Friday).
IPOs: the biggest event this week is the demerger of The Lottery Corporation from Tabcorp. The new company (code: TLC) lists tomorrow and will contain lottery and Keno operations for all states and territories except WA.
The line-up for the rest of the week currently looks like this: Nordic Minerals, Bellavista Resources (Wednesday); TG Metals (Thursday); and Oceana Lithium (Friday).
The dollar rallied 1.04 per cent this morning to 70.52 US cents.
Commodities
Hard commodities rallied after China cut a lending rate, Shanghai started to emerge from lockdown and the US dollar eased from recent highs.
“China is planning to open its economy gradually and go for easy lending, which is providing a positive impact on base metals,” Vandana Bharti, assistant vice-president of commodity research at SMC Comtrade, told Reuters.
“Also the dollar index is gradually moving lower and helping commodities.”
Iron ore was boosted by news stockpiles at ports declined for an eighth week. The spot price for ore landed in China climbed US$3.33 or 2.5 per cent to US$134.36 a tonne. Prices on the Dalian Commodity Exchange improved around 3 per cent.
Benchmark copper on the London Metal Exchange edged up 0.1 per cent to US$9,422 a tonne. Aluminium advanced 1.4 per cent, lead 4.7 per cent and tin 1.3 per cent. Nickel retreated 0.9 per cent and zinc 0.2 per cent.
BHP‘s US-traded depositary receipts put on 2.2 per cent. The Big Australian’s UK stock firmed 2.89 per cent. Rio Tinto added 2.37 per cent in the US and 1.91 per cent in the UK.
Oil‘s gains were tempered by selling pressure on equity markets. Brent crude settled 51 US cents or 0.4 per cent ahead at US$112.55 a barrel.
Gold recorded its first weekly gain in a month. Metal for June delivery settled 90 US cents or 0.1 per cent ahead on Friday at US$1,842.10 an ounce. The NYSE Arca Gold Bugs Index eased 0.24 per cent.
For the week, gold improved 1.7 per cent. The advance broke a run of four straight weekly losses.
