Opening Call: The Australian share market is to open higher.
U.S. stocks fell but pared greater losses from earlier in the session. The yield on the 10-year Treasury climbed to 2.91%. The WSJ Dollar Index advanced to 95.10. U.S. oil prices edged up to their highest closing price since March 8. Gold prices rose despite strength in the dollar and Treasury yields.
Australian Market
Australia’s S&P/ASX 200 climbed 0.3% as gains by shares of banks offset weakness among mining stocks. Data released mid-session showed the economy grew by more than expected in the March quarter. Banks NAB, Westpac, ANZ and Commonwealth put on between 0.9% and 2.25%. Lithium miners Liontown and Pilbara Minerals fell by 19% and 22%, respectively. A note by Goldman Sachs analysts said they believe the lithium bull market is over. Gold stocks also fell.
US Market
U.S. stock indexes were down slightly on the first day of June, after capping a volatile trading month. The S&P 500 closed down 0.8%, with all three major U.S. indexes handing back morning gains. The Dow Jones Industrial Average lost about 0.5%, while the technology-focused Nasdaq Composite fell 0.7%. The session ushers in a new trading month, but few investors expect a reprieve from the volatility that has dominated markets this year. Many traders remain worried about the pace of the Federal Reserve’s interest-rate increases and whether they will plunge the U.S. economy into a recession. Eight of the last 11 extended Fed rate-rise cycles have eventually ended in recession, according to Deutsche Bank analysts.
Still, many traders say a recession isn’t guaranteed, and any significant economic slowdown in the U.S. could be months away. That has led some investors to wade into the market and scoop up shares with beaten-down valuations, injecting more volatility into markets. “Most of the gains we saw last week have been a bear-market rally,” said Chris Wallis, CEO and chief investment officer for Vaughan Nelson Investment Management. “I think we will have prolonged volatility, but sometime between June and September there is a good chance for a market bottom.” Mr. Wallis doesn’t rule out the possibility of a recession, driven by a global growth slowdown and an inflation surge, this year.
Commodities
Oil futures ended higher as Shanghai eased its Covid-19 lockdown, signaling increased demand for crude, as WTI reached its highest closing price since March 8.. Shanghai moved to restore full bus and subway service, as well as basic rail connections with the rest of China. Still, more than half a million people in the city of 25 million are still under lockdown or in designated control zones because virus cases are still being detected, the Associated Press reported.
Traders were also preparing for a meeting of the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, after The Wall Street Journal reported the group was considering exempting Russia from its production targets. West Texas Intermediate crude for July delivery rose 0.5% to close at $115.26 a barrel on the New York Mercantile Exchange. August Brent crude, the global benchmark, gained 0.6% to settle at $116.29 a barrel on ICE Futures Europe.
“This potentially opens the door for other OPEC+ members to increase output more aggressively. However, in reality, given that most members have failed to hit their output targets consistently for several months, it will likely be a struggle for the group as a whole to increase output more aggressively,” said Warren Patterson, head of commodities strategy at ING, in a note.
Oil Futures
Precious metals enjoyed another strong session despite rising Treasury yields and a strengthening dollar. Gold futures climbed 0.3%, to finish the session at $1,843.30.
Forex
Major currencies fell against the US dollar in European and US trade. The Euro fell from highs near US$1.0735 to lows near US$1.0630 and was around US$1.0645 at the US close. The Aussie dollar eased from US72.27 cents to lows near US71.55 cents and was near US71.75 cents at the US close. And the Japanese yen eased from 129.15 yen per US dollar to JPY130.18 and was near session lows at the US close.
European Markets
European sharemarkets eased on Wednesday. German retail sales fell by 5.4% in April – worse than expected. And the Eurozone purchasing managers index for manufacturing eased from 55.5 to
54.6 – the lowest since November 2020. The pan-European STOXX 600 index fell by 1.0%. The German Dax index lost 0.3% and the UK FTSE index fell by 1.0%. In London trade, shares in Rio Tinto rose by 0.1% while BHP shares rose by 1.4%.
Asian Markets
Earlier Wednesday, Chinese stocks ended mixed, pulling back from gains on Tuesday that were driven by news of Shanghai’s further easing of Covid restrictions. The benchmark Shanghai Composite Index edged down 0.1%, while the Shenzhen Composite Index rose 0.3% and the ChiNext Price Index gained 1.0%. Auto companies, including car makers, component suppliers and after-sales services providers, led the gains after a district in Shanghai rolled out cash-subsidy programs for car purchases on top of the city-level stimulus announced over the weekend. But that momentum was offset by losses in restaurant and hotel operators, which gave up reopening-driven gains earlier in the session.
Hong Kong’s Hang Seng Index edged down 0.6%. Medical companies led the downturn, as CSPC Pharmaceutical dropped 6.1% and Wuxi Biologics fell 2.0%. Consumer goods companies, which led gains the past session, further weighed on the market. Japanese stocks advanced, led by gains in auto and financial stocks, as the yen’s weakening bolstered hopes for an earnings recovery. The Nikkei Stock Average rose 0.7%.
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