Opening Call: The Australian share market is to open lower.
U.S. stocks rose as economic data showed continued strength in the economy alongside strong corporate earnings. The yield on the 10-year Treasury ticked higher to 1.27%. The WSJ US Dollar Index slid for the fourth consecutive day, dropping to 86.72. U.S. oil prices settled at their highest level in more than two weeks. Gold futures climbed to their highest settlement in over six weeks.
Australia’s S&P/ASX 200 climbed 0.5%, recovering some of the prior session’s losses amid gains by tech and mining stocks. The tech sector rose 2.6%, following the outperformance by U.S. tech stocks, while the financial sector closed flat. The ASX 200 is 0.2% off Tuesday’s record settlement.
The Dow Jones Industrial Average and the S&P 500 rose 0.4%, but both benchmarks fell shy of fresh records as new data suggested the economic recovery has started to slow. The Nasdaq Composite also rose, gaining 0.1%.
The gains followed data showing gross domestic product grew by 6.5% on an annualized basis in the second quarter, up slightly from earlier in the year but well below analysts’ forecasts of 8.4% growth. Meanwhile, jobless claims, a proxy for layoffs, came in at 400,000, resuming their downward trajectory but coming in above projections. Investors shrugged off the economic misses though.
Gold futures rallied, buoyed by weaker-than-expected U.S. economic data, even after the Federal Reserve indicated Wednesday that the central bank may taper its bond-buying programs in coming months and demand for gold fell in a report from the World Gold Council. The central bank, however, underscored that policymakers required more economic improvement before moving definitely toward tapering.
The gold market now has a “trifecta of economic catalysts” that could push gold higher, said Jeff Wright, chief investment officer at Wolfpack Capital. Those are a dovish FOMC statement, U.S. weekly jobless claims above consensus with continuing claims also above estimates, and U.S. gross domestic product expanding at a 6.5% annual pace in the second quarter.
The most active December gold-futures contract rose 1.7% to settle at $1,835.80 an ounce. Based on the most-active contracts, that was the highest most-active contract finish since June 16 and largest one-day percentage gain since May 6, FactSet data show.
Oil futures rose, with both U.S. and global benchmark crude marking another settlement at the highest in over two weeks, a day after U.S. government data revealed a weekly drawdown in domestic crude, gasoline and distillate inventories.
The across-the-board supply declines reported by the Energy Information Administration “suggest demand levels remain strong, despite rising concerns around the rapid spread of the Covid-19 Delta variant, both in the U.S. and abroad,” said Robbie Fraser, global research & analytics manager at Schneider Electric.
West Texas Intermediate crude for September delivery rose 1.7% to settle at $73.62 a barrel on the New York Mercantile Exchange. The front-month global benchmark contract, September Brent crude, climbed nearly 1.8% to settle at $76.05 a barrel on ICE Futures Europe, ahead of its expiration at the end of Friday’s session.
Major currencies were firmer against the US dollar in European and US trade. The Euro rose from lows near US$1.1850 to highs near US$1.1890 and was near the highs at the US close. The Aussie
dollar held between lows near US73.75 cents and highs near US74.15 cents and was near US74.00 cents at the US close. And the Japanese yen rose from near 109.89 yen per US dollar to JPY109.41 and was the strongest level at the US close.
European share markets were firmer on Thursday with the pan-European STOXX 600 index up by 0.5% to record highs. Miners led the way, up 2.4% after Anglo American lifted its shareholder payout to a record US$4.1 billion. Reuters also noted that “UK-listed Royal Dutch Shell gained 3.8% and France’s TotalEnergies added 2.2% after both companies announced share buybacks.” The German Dax index rose by 0.5% and the UK FTSE rose by 0.9%. In the London trade, shares in Rio Tinto rose by 2.6% and BHP shares were up 2.0%.
Earlier Thursday, Chinese stocks rebounded sharply from steep losses earlier this week, triggered by Beijing’s aggressive regulatory actions. The upturn followed the news that China’s top securities regulator privately told global financial institutions that Beijing will consider the impact on markets when it introduces new policies in the future. The benchmark Shanghai Composite Index rose 1.5% while the Shenzhen Composite Index gained 3.1%. The ChiNext Price Index jumped 5.3%, its largest one-day gain since early 2019.
Hong Kong stocks also bounced back from steep losses earlier this week. The benchmark Hang Seng Index rose 3.3%. The Hang Seng TECH Index jumped 8.0%. Japan’s Nikkei Stock Average advanced 0.7%. Electronics stocks led gains.