Opening Call: The Australian share market is to open higher.
U.S. stocks fell, led by sharp losses among technology companies. The yield on the 10-year Treasury slipped to 1.70%. The WSJ Dollar Index fell to 88.94. U.S. oil prices dropped moderately after rallying nearly 6% over the past two sessions. Gold prices posted their first loss in five sessions, after December’s PPI reading came in below market expectations.
Australia’s S&P/ASX 200 grew 0.5%, driven by gains in energy and materials stocks which ended 1.5% and 2.6% higher, respectively. Miners were the beneficiaries of a rise in iron-ore prices. Crown Resorts was the biggest gainer for the day, putting on 8.8% after news that Blackstone had revised up its takeover bid for the company.
The S&P 500 and Nasdaq Composite both fell as declines in technology shares weighed on the stock market. The S&P 500 dropped 1.4%, while the tech-heavy Nasdaq Composite lost 2.5%. The Dow Jones Industrial Average fell 0.5%. Technology stocks have come under pressure in the new year as government-bond yields have risen. Higher yields can reduce the appeal of the future earnings promised by many tech stocks. The S&P 500’s tech sector dropped 2.2% for the session, bringing its year-to-date losses to 5.2%.
The largest U.S. stocks helped pull the market lower, with Apple shares falling 1.5% and Microsoft shares sliding 3.8%. More economically sensitive parts of the stock market held up better, with the industrial sector of the S&P 500 gaining 0.3%.
Gold futures posted their first loss in five sessions, after a rise in the U.S. producer price index reading for December came in below market expectations. “It could be argued that the bullish case for gold is its reputation as an inflation hedge, especially given central banks’ recent record for recognizing how severe the situation is,” said Craig Erlam, senior market analyst at OANDA. “But with inflation likely nearing its peak, that may not last.”
Gold is traditionally viewed as a hedge against inflation, but the surge in prices for goods and services, caused by supply-chain bottlenecks and a revival in consumer demand in the wake of the Covid pandemic, is also likely to compel the Federal Reserve to lift interest rates at a faster than expected pace this year and may weigh on precious metal prices. Against that backdrop, February gold futures fell 0.3% to settle at $1,821.40 an ounce, after climbing 0.5% in the previous session.
Oil futures ended lower, with a significant rise in U.S. gasoline stockpiles last week raising concern over the Omicron variant’s impact on demand for fuel, even as domestic crude supplies stand at their lowest since 2018. Prices fell despite continued weakness in the U.S. dollar, “signaling that the move higher in oil futures over the past month may have once again gotten too far ahead of the physical market reality,” said Troy Vincent, senior market analyst at DTN.
Hopes of “Omicron burning through the population quickly has caused many to overlook the impact the current global wave of the virus is having on demand,” Mr. Vincent said. Wednesday’s Energy Information Administration report “emphasized just how hard it is hitting gasoline demand despite the lack of new U.S. lockdowns.” West Texas Intermediate crude for February delivery fell 0.6% to settle at $82.12 a barrel on the New York Mercantile Exchange. March Brent crude, the global benchmark, lost 0.2% to settle at $84.47 a barrel on ICE Futures Europe. WTI and Brent both finished Wednesday at their highest since Nov. 9.
Major currencies were mixed against the US dollar in European and US trade. The Euro rose from lows near US$1.1438 to highs near US$1.1478 and was near US$1.1455 at the US close. The Aussie dollar fell from highs near US73.13 cents to lows near US72.74 cents and was near US72.80 cents at the US close. And the Japanese yen rose from near 114.64 yen per US dollar to JPY113.99 and was near JPY114.10 at the US close.
European sharemarkets were little changed on Thursday. The panEuropean STOXX 600 index ended flat. Shares of household goods dropped by 1.2% while autos shares gained 1.6%. The German Dax index rose by 0.1% and the UK FTSE index gained 0.2%. In London trade, shares in Rio Tinto (+0.2%) and BHP (+1.1%) both lifted.
Earlier Thursday, Chinese shares retreated, tracking broad declines in other Asian stock markets. The Shanghai Composite Index fell 1.2%, the Shenzhen Composite Index and the ChiNext Price Index both shrank 1.7%. Chinese liquor makers were among the worst performers amid concerns over weaker sales in the upcoming Lunar New Year season due to China’s coronavirus outbreak. Covid concerns will likely persist, after the Chinese port city of Tianjin reported higher infections despite efforts to rein in the outbreak.
Hong Kong stocks ticked higher, as the market’s soaring momentum on Wednesday eased. The benchmark Hang Seng Index edged up 0.1%. Banks led gains, as the sector continued to track up amid hopes for a series of interest-rate increases this year. However, gains were somewhat offset by weakness in tech stocks, which came under profit-selling pressure after substantial increases the last session.
Japan’s Nikkei Stock Average fell 1.0% amid concerns about the spread of Covid-19 cases and the yen’s strength. Japan’s daily infections reportedly exceeded 10,000 on Wednesday for the first time in more than four months, while Prime Minister Fumio Kishida said earlier this week that strict border restrictions will be extended until the end of February.