Opening Call: The Australian share market is to open higher.
U.S. stocks posted gains after closing the book on a historically bad first half of the year. The yield on the 10-year Treasury fell to 2.89%. The WSJ Dollar Index strengthened to 97.77. Oil prices finished the week strong as supply worries resurfaced. Gold continued lower, posting a weekly loss.
Australia’s S&P/ASX 200 dropped 0.4%, giving away early gains to finish down for the week. Shares of gold miners rose but iron-ore heavyweights Rio Tinto, BHP and Fortescue fell . Some lithium stocks were also weak, with Liontown falling 5.2% as it gave back yet more of its gains from early in the week. The energy sector fell by 3.5%. The ASX 200, which is coming off its worst month and quarter since March 2020, lost 0.6% for the week.
U.S. stocks rose to start the second half of the year, a day after a decline that closed out the broad index’s worst first half of the year since 1970. The S&P 500 gained about 1.1%, offering investors a respite after a downbeat second quarter that reflected fears that the Federal Reserve’s efforts to tame inflation could tip the economy into a recession.
The tech-focused Nasdaq Composite Index added about 0.9%. The Dow Jones Industrial Average rose around 1.1%. Stocks climbed in the afternoon after back-and-forth trading earlier in the day. Even as growth slows, investors remain focused on persistent inflation that has forced central banks to reverse years of easy-money policies and accelerate interest-rate increases. That has created challenging conditions for markets.
“If the inflation fever begins to break a little bit here, it would give the Fed more breathing room,” said Jurrien Timmer, director of global macro at Fidelity Investments. “That could be enough to calm the economy down without causing much collateral damage. “
Gold futures briefly dipped below the key $1,800-an-ounce level – posting a loss for the week. The weakness in precious metal comes after gold shed 2% of its value during the month of June. “Central banks are only picking up speed in tightening monetary policy, creating pressure on long-term inflation expectations,” said said Alex Kuptsikevich, senior market analyst at FxPro. “In such an environment, demand for gold as insurance against inflation promises to decline in the coming weeks.”
Gold futures for August delivery fell 0.3% to settle at $1,801.50 an ounce on Comex, marking the lowest most-active contract finish since February and ending 1.6% lower for the week, according to Dow Jones Market Data. Prices touched a low of $1,783.40, the lowest since January.
Oil futures tallied their first gain in three sessions, settling higher for the week, after major producers raised output as expected and outages in Libya fed concerns about reduced supply. Front-month August West Texas Intermediate crude rose 2.5% to settle at $108.43 a barrel on the New York Mercantile Exchange. Prices ended nearly 0.8% higher for the week, according to Dow Jones Market Data. September Brent crude climbed 2.4% to $111.63 a barrel on the ICE Futures Europe, with the contract settling up by 2.3% from the week-ago settlement.
Lingering worries about tight supply, and signs activity in China is picking up, continue to support energy prices. On Thursday, the Organization of the Petroleum Exporting Countries and its allies confirmed a proposal to boost output by another 648,000 barrels a day in August. However, the “question on future output levels was left unanswered and this could add to the overall uncertainty,” said Lukman Otunuga, manager, market analysis, at FXTM.
Major currencies were mixed against the US dollar in European and US trade. The Euro held between US$1.0365 and US$1.0470 and was near US$1.0430 at the US close. The Aussie dollar held
between US67.60 cents US68.35 cents and was near US68.15 cents at the US close. And the Japanese held between 134.75 yen per US dollar and JPY135.65 and was near JPY135.20 at the US close.
European sharemarkets were little-changed on Friday. Gains in defensive sectors were balanced by falls in semi-conductors and commodity-linked stocks. Utilities rose by 3.1% while miners lost
2.5%. Data showed a lift in Eurozone inflation from 8.1% to a record high of 8.6% in June. The pan-European STOXX 600 index was flat. The German Dax index rose by 0.2% and the UK FTSE index fell by less than 0.1%. In London trade, shares of Rio Tinto fell by 1.7% and shares in BHP fell by 3.2%.
Earlier Friday, China stocks ended lower amid the latest signs of rising Sino-U.S. tensions after the U.S. government blacklisted five Chinese companies for allegedly helping Russia’s military, while NATO’s latest security concept for the first time singled out China. The benchmark Shanghai Composite Index fell 0.3%, while the Shenzhen Composite Index was down 0.2%. The tech-heavy ChiNext Price Index was the worst performer, falling 1.0%.
Travel companies including tourism agencies, hotel operators and aviation firms led losses, as the industry pulled back from soaring gains in recent sessions. Japanese stocks ended lower, dragged by weakness in energy and auto stocks amid persistent concerns about operation costs and the economic outlook. Mitsui lost 5.5% and Mitsubishi shed 5.4% after reports that Russia will replace the Sakhalin-2 project operator. The Nikkei Stock Average fell 1.7%.