Opening Call: The Australian share market is to open higher.
U.S. stocks surged as investors weighed the week’s economic data. The yield on the 10-year Treasury slid to 2.92% as the Treasury yield curve continued to consolidate. The WSJ Dollar Index retreated to 99.79. Oil prices recovered some of their recent losses. Gold prices continued to lose ground.
Australia’s S&P/ASX 200 lost 0.7%, with losses among commodity and financial stocks completing a weekly reverse for the benchmark index. The ASX 200 slipped 1.1% for the week. The materials sector shed 3.2% and provided eight of the ASX 200’s 10 biggest losers. Most lithium and gold stocks also fell. Shares of wealth managers led the financial sector lower. Strength among consumer staples and health stocks partially offset weakness elsewhere.
U.S. stocks rebounded, capping a volatile week during which investors tried to reconcile a flurry of corporate-earnings reports and data that at times appeared to offer conflicting narratives on the economic outlook. Major indexes rallied to end the week on a fresh round of bank earnings and data showing retail sales had climbed more than expected in June. The S&P 500 rose 1.9%, snapping a five-session losing streak. Financial stocks paced the benchmark’s gain.
The tech-focused Nasdaq Composite added 1.8% and the Dow Jones Industrial Average climbed 2.1%. All three indexes suffered weekly losses. The S&P 500 fell 0.9%, the Nasdaq dropped 1.6% and the Dow slipped 0.2% for the week. The market’s volatile turn may be a sign the 2022 selloff is nearing a bottom, said Brad McMillan, chief investment officer at Commonwealth Financial Network. Companies’ stock prices are now more closely aligned to projected earnings, and many investors are already accounting for the effects of rising interest rates, he said.“We’re in a bottoming process,” Mr. McMillan said. “What you’re seeing now depends on whether you see earnings as good or bad. Yesterday was bad, but we’re still seeing expected earnings growth.”
Gold briefly dipped below $1,700 an ounce before ending slightly lower, suffering its fifth straight weekly decline. Gold futures for August delivery fell 0.1% to end at $1,703.60 an ounce on Comex, after dipping as low as $1,696.60 during the session. The yellow metal fell 2.2% for the week.
A team of commodity strategists at UBS downgraded their gold forecasts. They now expect the yellow metal to trade as low as $1,600 per ounce by the end of 2022, before staging a slight recovery in 2023. “We think it’s too early to buy gold at current levels and still advise protecting existing positions. We see opportunities to be more positive in 2023,” the UBS precious metals team wrote in a note to clients.
Oil futures suffered steep weekly declines, but bounced Friday after news reports said the U.S. doesn’t expect Saudi Arabia to immediately boost production during President Joe Biden’s visit to the kingdom. West Texas Intermediate crude for August delivery rose 1.9% to close at $97.59 a barrel on the New York Mercantile Exchange. The U.S. benchmark suffered a 6.9% weekly fall. September Brent crude gained 2.1% to settle at $101.16 a barrel on ICE Futures Europe.
Brent fell 5.5% for the week. Citing a U.S. official, Reuters reported that Washington doesn’t expect to see Saudi Arabia immediately boost production, with expectations instead centered around an Aug. 3 meeting of OPEC+, made up of the Organization of the Petroleum Exporting Countries and their allies.
Major currencies were firmer against the US dollar in European and US trade. The Euro rose from lows near US$1.0005 to highs near US$1.0095 and was at US$1.0087 at the US close. The Aussie dollar rose from lows near US67.20 cents to highs near US68.00 cents and was near US67.92 cents at the US close. And the Japanese yen rose from near 139 yen per US dollar to JPY138.42 and was near JPY138.53 at the US close.
European sharemarkets rose on Friday. Investors were comforted after two of the US Federal Reserve policymakers said they favoured a 75 basis point hike at the next meeting rather than 100bp as some analysts expect. Italian shares rose 1.8% as investors watched developments in a political crisis. The panEuropean STOXX 600 index rose by 1.8%. The German Dax index gained 2.8% and the UK FTSE index rose by 1.7%. In London trade, shares of Rio Tinto rose by 0.3%; BHP shares rose 1.8%.
Earlier Friday, China stocks ended lower, weighed by data which showed that the country’s economy contracted 2.6% in the April to June period when compared with the first quarter. The benchmark Shanghai Composite Index fell 1.6%, the Shenzhen Composite Index dropped 1.5% and the ChiNext Price Index slid 2.1%. Financial stocks were among the worst performers.
Hong Kong’s Hang Seng Index ended lower for the fifth straight session, losing 2.2%, weighed by weak sentiment on the real estate and tech sectors. A selloff in property shares continued amid a movement by Chinese homeowners to stop paying mortgages on unfinished homes. The benchmark index declined 6.6% this week.
The Nikkei Stock Average added 0.5% as gains for Fast Retailing offset losses in financial stocks. The broader market index, Topix, ended flat. Investors are focusing on earnings results for the quarter ended May.