Opening Call: The Australian share market is to open higher.
U.S. stocks reached new records as major banks prepare to kick off earnings season this week. The yield on the 10-year Treasury edged higher to 1.37%. The WSJ Dollar Index rose to 86.99, helping push gold prices lower. Oil prices declined amid uncertainty regarding both demand and production.
Australia’s S&P/ASX 200 rose 0.8% amid strong gains by iron ore miners after China’s central bank on Friday cut the reserve requirement ratio for banks. Materials were the ASX 200’s best-performing sector, rising 2.2%. Australian Pharmaceutical Industries surged 20% after receiving a takeover proposal from Wesfarmers.
U.S. stocks edged higher to records as investors prepared for corporate earnings season to kick off this week.
The S&P 500 and Dow Jones Industrial Average both gained 0.4%. The tech-heavy Nasdaq Composite added 0.2%. All three indexes closed at records.
Earnings season begins in earnest Tuesday, and investors will be watching to see if companies’ results and what executives have to say about business in the coming months justify the high valuations in the equity market.
According to FactSet, analysts expect that S&P 500 profits rose 64% in the second quarter from a year earlier. That growth rate would be the highest in more than a decade but is measured against a period in which the pandemic had upended the business environment, causing a steep decline in profits.
“The numbers are going to look wacky and are going to be extremely hard to compare,” said Jay Jacobs, head of research and strategy at Global X, a provider of exchange-traded funds. “So the future expectations I think are going to be much more valuable than the actual earnings amounts.
Gold futures fell, weighed down by a perkier dollar and U.S. equities that were holding at or near record-high levels, but prices for the precious metal finished above the $1,800 mark for a fourth consecutive session.
“Gold prices are retracing once again from their highs after posting their best performance in seven weeks,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a daily note.
Mr Aslam said gold likely will be supported by reports of the spread of the Delta variant of Covid, raising questions about the global economic outlook. August gold futures declined 0.3% to settle at $1,805.90 an ounce.
Oil futures headed sharply lower, succumbing to growing concerns about the spread of the Delta variant of the coronavirus that could hobble appetite for crude in parts of the world, commodity specialists warn.
“Traders are now refocusing on the spread of the Covid-19 pandemic and global concerns over the new variants’ expansion are weighing on prices, despite tightening oil supplies globally,” wrote Louise Dickson, oil markets analyst at Rystad Energy, in a Monday research note.
Renewed fretting about oil demand in the face of more transmissible variants of Covid also amplified the discord between the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, as a spat over easing output curbs remains unresolved.
West Texas Intermediate crude for August delivery fell 0.9% to settle at $73.85 a barrel on the New York Mercantile Exchange. September Brent crude, the global benchmark, was off 0.7% to $74.99 a barrel on ICE Futures Europe.
Major currencies were mostly firmer against the US dollar in European and US trade. The Euro rose from lows near US$1.1823 to highs near US$1.1881 and was near US$1.1872 at the US close. The Aussie dollar lifted from lows near US74.16 cents to highs near US74.93 cents and was near US74.75 cents at the US close. But the Japanese yen eased from 109.89 yen per US dollar to JPY110.24 and was near JPY110.13 at the US close.
European sharemarkets lifted on Friday. The pan-European STOXX 600 index closed up by 1.3% with shares of miners surging 4%. The German Dax index gained 1.7% and the UK FTSE index added 1.3%. As measured by GDP, Britain’s economy grew by 0.8% in May compared with April (survey: +1.5%). London-listed shares in Rio Tinto (+4.1%) and BHP (+4.3%) both traded higher.
Earlier Monday, Chinese stocks ended the session higher, rebounding from losses last week. The benchmark Shanghai Composite Index rose 0.7%, reversing two consecutive sessions of declines. The Shenzhen Composite Index added 2.0% while the ChiNext Price Index gained 3.7% to reach its highest closing level since 2015. The cybersecurity sector led the upturn after Chinese officials said last week the government may announce policy measures to encourage cybersecurity spending.
Hong Kong stocks advanced, extending their recovery from an eight-session losing streak earlier this month. The benchmark Hang Seng Index rose 0.6% after hitting a year-to-date low last week. Restaurant operators led the upturn, rebounding from their earlier weakness, while automakers lent further support.
The Nikkei Stock Average gained 2.2%, led by makers of robots and other industrial machinery, as hopes grew for global economic recovery and Capex growth. Data earlier in the day showed that core machinery orders at Japanese companies rose 7.8% in May. Covid-19 infection trends are being watched closely.