Opening Call: The Australian share market is to open higher.
U.S. stocks shook off earlier losses to settle with healthy gains. The yield on the 10-year Treasury was little changed at 2.91% ahead of Friday’s U.S. jobs data. The WSJ Dollar Index retreated to 94.49. U.S. oil prices rose to their highest closing price since March 8. Gold reached its highest close in about a month.
Australia’s S&P/ASX 200 gave back 0.8%, turning negative for the week amid weakness in banking and tech stocks. Banks–Westpac, NAB, Commonwealth, ANZ and Macquarie–fell by between 0.7% and 2.7%. Insurers and wealth managers also slipped. WiseTech, Xero and Block gave up between 2.0% and 4.95% as the volatile tech sector fell by 2.5%. Energy and utilities were the only two sectors to rise, gaining as Australia’s energy market operator warned of tight gas supply.
Stocks rose, with all three major U.S. indexes in the green, putting the S&P 500 on track to finish the week in positive territory. The benchmark S&P 500 gained 1.8%, while the tech-focused Nasdaq Composite added 2.7%. The Dow Jones Industrial Average was up about 1.3%. Major stock indexes declined Wednesday in a volatile trading session to start the month. This week, the S&P 500 and Nasdaq are on pace to finish the week up.
Some investors said they believed recent data suggests the U.S. economy is softening and inflation is cooling, meaning the Fed might not need to act more aggressively than already planned. Federal Reserve Vice Chairwoman Lael Brainard on Thursday said half-percentage-point interest-rate increases would likely be appropriate at the Fed’s next two meetings, but didn’t commit to a slower path at subsequent meetings.
“Word on the street is that this is a good entry point-that equities have sold off so much they’ve been overdone,” said Aoifinn Devitt, chief investment officer at Moneta. Her firm has added to its positions in assets that work as a hedge against rising inflation, including real estate and commodities.
Gold and other precious metals closed higher, erasing declines from earlier in the week, while the yellow metal also scored its highest close in about a month. The move comes as Treasury yields and the dollar DXY retreated, making precious metals more attractive by comparison. Gold futures for August delivery rose 1.2% to settle at $1,871.40 per troy ounce, its highest close since May 6, and the best daily percentage gain since May 19, according to Dow Jones Market Data. The yellow metal also is now up 1.3% on the month.
Citi’s Aakash Doshi, a precious metals analyst, recently cut his near-term price target for gold, arguing that a confluence of factors are conspiring to keep a lid on the precious metal’s price. “A hawkish Fed, higher real rates, and what still remains anchored to medium-term inflation expectations (in both surveys and bond market pricing) have weighed on gold price momentum amid a relatively robust [U.S. dollar] backdrop. It also seems likely some geopolitical risk premium has eroded as the market absorbed the Russia/Ukraine conflict,” Doshi wrote in a note to clients.
Oil futures ended higher after U.S. crude inventories showed a much larger-than-expected drop and traders looked past a decision by OPEC+ to boost output by larger increments in July and August. West Texas Intermediate crude for July delivery rose 1.4% to close at $116.87 a barrel on the New York Mercantile Exchange. July Brent crude gained 1.1% to settle at $117.61 a barrel on ICE Futures Europe.
OPEC+ agreed to raise its production target by 648,000 barrels a day in July and August, compared with the 432,000 barrel-a-day monthly rises that it has implemented since last year. Concerns over supply remain, however, given OPEC+’s difficulties in meeting earlier production increases, analysts noted.
“Fortunately for the bull camp, OPEC+ has consistently underproduced relative to the OPEC+ production agreement,” while Indian oil output hit a 28-year low in its just completed fiscal year, noted analysts at Zaner. “With the net supply-side takeaway still bullish, demand views improved by the opening of Shanghai, less equity market anxiety, and a record Asian crude oil import tally last month, the markets should be able to find support relatively soon.”
Major currencies rose against a weaker US dollar in European and US trade. The Euro rose from lows near US$1.0650 to highs near US$1.0750 and was highs at the US close. The Aussie dollar eased from US71.40 cents to highs near US72.70 cents and was near US72.60 cents at the US close. And the Japanese yen rose from levels near 130 yen per US dollar to JPY129.50 and was near JPY129.85 at the US close.
European sharemarkets rose on Thursday. French spirits group Remy Cointreau rose 4.9% after its profit beat expectations and it raised profit guidance. Other luxury good stocks rose 1.7-3.1%. Investors were encouraged by data showing Eurozone producer prices rising 1.2% from the previous month in April, below expectations of 2.3% rise. The pan-European STOXX 600 index rose by 0.6%. The German Dax index gained 1%. The UK market was closed for a public holiday.
Earlier Thursday, China stocks ended the session higher, after Chinese central bank officials reiterated a commitment to help shore up the country’s economy and introduced a host of specific financing support measures for various sectors and companies. The Shanghai Composite Index rose 0.4%, while the Shenzhen Composite Index advanced 0.7%. The tech-heavy ChiNext Price Index rose by the most, ending 1.2% higher. The auto sector, which has been at the center of the government’s consumption stimulus policies, maintained recent momentum to lead gains.
Hong Kong’s Hang Seng Index lost 1.0%, weighed by worries over a stronger U.S. dollar and elevated U.S. Treasury yields. Investor sentiment was also pressured by news of more Covid-19 sub-variant cases in Hong Kong, as well as China’s Caixin PMI reading Wednesday, which showed signs of more headwinds for the country’s smaller manufacturers, IG market analyst Yeap Jun Rong said in a note. Pharmaceutical stocks led losses. The Hong Kong stock market will be closed Friday due to a public holiday.
Japanese stocks were dragged lower by falls in tech and pharmaceutical stocks, as concerns continue about higher cost of borrowing and materials. Fujitsu dropped 4.4% and Astellas Pharma lost 4.1%. Meanwhile, Kansai Paint soared 10.5% following its plan to sell its Africa business. The Nikkei Stock Average fell 0.2%.