Opening Call: The Australian share market is to open lower.
Major stock averages fell from record levels breaking a five-day winning streak. The yield on the 10-year Treasury fell to 1.24%. The WSJ Dollar Index ticked lower to 87.26. U.S. benchmark oil prices edged lower in another listless, midsummer trading session. Gold prices edged higher ahead of the conclusion of this week’s Federal Reserve policy meeting.
Australia’s S&P/ASX 200 rose 0.5%, a record close, led by commodity and financial stocks. The benchmark opened higher following a positive lead from U.S. equities and gathered strength through the day as Australia’s second-most populous state said it would ease its latest Covid lockdown. The energy sector added 1.3%, while Commonwealth Bank rose 1.6% on rising analyst expectation of capital management from the country’s largest lender.
U.S. stocks slipped from records after major indexes logged five consecutive days of gains. The S&P 500 dropped 0.5%, while the Dow Jones Industrial Average fell 0.2%. The technology-heavy Nasdaq Composite declined 1.2% as shares of big tech companies pulled back.
The three indexes closed at all-time highs Monday. The S&P 500 is up 17% in 2021, while the Nasdaq Composite has gained 14%. “I wouldn’t write this off as anything more than taking a little bit of a breather after the pretty good rally that we saw last week,” said Jason Vaillancourt, co-head of global asset allocation at Putnam Investments.
Gold futures logged a slight gain, but ended below the closely watched $1,800-an-ounce mark for a second-straight session, holding ground near the lowest price in three weeks.
Traders await the conclusion of a two-day meeting of Federal Reserve policymakers. Officials are expected to discuss plans to eventually taper the Fed’s bond-buying program, but economists said details are unlikely to emerge.
“While gold bugs may draw strength from the shaky risk sentiment following crackdowns in China, the precious metal is likely to remain confined within a range” until the end of the two-day Fed meeting, said Lukman Otunuga, senior research analyst at FXTM. Gold futures for August delivery tacked on 0.03% to settle at $1,799.80 an ounce on Comex.
Oil futures settled lower as traders weighed worries about the impact on energy demand from the spread of the Delta variant of the coronavirus that causes Covid-19. After the Organization of the Petroleum Exporting Countries and their allies – a group together known as OPEC+ – reached a deal earlier this month to gradually raise output, “the focus has turned back to the demand side,” said Colin Cieszynski, chief market strategist at SIA Wealth Management.
West Texas Intermediate crude for September delivery, the U.S. benchmark, fell 0.4% to settle at $71.65 a barrel on the New York Mercantile Exchange after settling Monday with a 0.2% loss.
Front-month September Brent crude, the global benchmark, declined 0.03% to settle at $74.48 a barrel on ICE Futures Europe, posting its first loss in six sessions.
Major currencies were firmer against the US dollar in European and US trade. The Euro rose from lows near US$1.1769 to highs near US$1.1840 and was near US$1.1820 at the US close. The Aussie dollar rose from lows near US73.37 cents to highs near US73.83 cents and was near US73.60 cents at the US close. And the Japanese yen rose from near 110.16 yen per US dollar to JPY109.58 and was near JPY109.75 at the US close.
European share markets were weaker on Tuesday. The pan-European STOXX 600 index fell by 0.5% with technology shares down 1.6%. Shares of consumer goods company Reckitt Benckiser shed 8.4%, its worst day since February 2003, on concerns about margin pressures. The German Dax index lost 0.6% and the UK FTSE fell by 0.4%. In the London trade, shares in Rio Tinto fell by 1.1% and BHP shares were down 0.5%.
Earlier Tuesday, Chinese stocks extended Monday’s steep losses, ending the session significantly lower as authorities’ aggressive regulatory actions intensified investor concerns. The benchmark Shanghai Composite Index lost 2.5%, hitting a three-month closing low. The Shenzhen Composite Index slid 3.3%, while the ChiNext Price Index sank 4.1% to 3232.84. Education-services companies continued to plummet as Beijing tightened industry rules, while renewable energy shares continued their broad downturn in recent weeks amid concerns over solar-glass oversupply.
Hong Kong stocks also ended sharply lower, in line with the Chinese market amid the same regulatory concerns. The benchmark Hang Seng Index fell 4.2%, its largest one-day loss in over a year. Chinese tech giants extended their slump, as the Hang Seng TECH Index dove 8.0%, erasing all gains in the past year. The Nikkei Stock Average, however, closed 0.5% higher, as gains in financial and insurance stocks offset losses in marine transportation shares. Lenders were among the best performers.