Opening Call: The Australian share market is to open lower.
U.S. stocks rose, clawing back most of yesterday’s tech-slump driven losses. The yield on the 10-year Treasury rose to 1.53% as a selloff in Treasurys continued. The WSJ Dollar Index climbed to 88.42, dragging gold prices lower. Oil prices climbed to their highest closing price since late 2014 amid a host of bullish factors.
Australia’s S&P/ASX 200 slipped 0.4%, with technology and consumer shares weighing as the index followed U.S. stocks lower. The benchmark had been more than 1% lower, threatening to give back all of Monday’s gains, but it rallied through the afternoon. The tech sector gave up 3.0% while the financial sector lost 0.2% after the RBA hinted at tighter mortgage-lending standards. The energy sector pared the overall losses, rising 2.4% amid higher oil prices.
U.S. stocks rose following Monday’s tech-driven selloff, while supply-and-demand friction pushed energy prices to multiyear highs. The Dow Jones Industrial Average rose 0.9% and the S&P 500 gained 1.1%. The tech-heavy Nasdaq Composite Index jumped 1.3% a day after falling more than 2%.
The shaky state of the stock market over the past month is both a result of typical seasonal volatility-September and October tend to see more selloffs than other months-but also somewhat inevitable. Backed by a Federal Reserve that has pursued a highly accommodative monetary policy, stock investors enjoyed an uninterrupted rally since last March, with the S&P 500 nearly doubling.
The recent spate of volatility was both unavoidable and relatively modest, said Michael Gayed, a portfolio manager and author of the Lead-Lag Report newsletter. Including Tuesday’s gains, the S&P is down less than 5% from its early September record. “If anything, this is long overdue,” he said.
Gold futures fell, with a climb in yields on government debt and a stronger U.S. dollar leading prices for the precious metal to suffer their first loss in four sessions. The “appreciating dollar is acting as a headwind, ahead of the heavily anticipated U.S. jobs report on Friday,” said Lukman Otunuga, senior research analyst at FXTM.
The metal has failed to draw strength from inflation fears or market caution, he added. “Given how gold remains sensitive to taper expectations, we should expect to see increased volatility through the non-farm payrolls data,” said Mr Otunuga in a market update. “Friday’s outcome could set the tone for the precious metal this month.”December gold futures fell by 0.4% to settle at $1,760.90 an ounce, after rising 0.5% on Monday.
U.S. oil futures stretched their gains into a fourth straight session to their highest settlement since late October 2014, a day after the Organization of the Petroleum Exporting Countries and their allies decided not to accelerate their plan for gradually relaxing production cuts. Natural-gas futures also rallied, with prices up by more than 9% to post the highest finish in nearly 13 years, with global supplies tight ahead of the winter heating season.
“With the global crude market consistently undersupplied already, record [natural] gas prices across key demand regions are expected to cascade into a strong uptick in heating demand for products like diesel and fuel oils,” he said in a daily note. That is ultimately supporting further draws of combined crude and product stocks, which “already sit well below normal for this time of year.”West Texas Intermediate crude for November delivery rose 1.7% to settle at $78.93 a barrel on the New York Mercantile Exchange. That was the highest front-month contract finish since Oct. 21, 2014, according to Dow Jones Market Data. December Brent crude added 1.6% to settle at $82.56 a barrel on ICE Futures Europe. Brent registered its highest close since Oct. 10, 2018.
Major currencies were mostly firmer against the US dollar in European and US trade. The Euro rose from lows near US$1.1580 to highs near US$1.1610 and was near US$1.1595 at the US close.
The Aussie dollar lifted from lows near US72.50 cents to highs near US73.00 cents and was near US72.90 cents at the US close. But the Japanese yen eased from 111.07 yen per US dollar to JPY111.54 and was near JPY111.47 at the US close.
European sharemarkets rose on Tuesday, led by banks (up 3.5%) and technology (up 2.2%). It was the first lift for tech stocks in eight sessions. Bank stocks rose to 18-month highs. The composite
purchasing managers index remained strong at a reading of 56.2, but down from 59.0 in August. Overall, the pan-European STOXX 600 index lifted 1.2% – its best session in 11 weeks. The German Dax index rose by 1.1% and the UK FTSE index gained 0.9%. In London trade, shares in Rio Tinto fell by 0.1% while shares in BHP lifted by 0.7%.
Earlier Tuesday, Hong Kong’s Hang Seng Index rose 0.3%, recovering slightly from Monday’s 2.2% decline. Chinese oil majors advanced amid the prospect of elevated oil prices, with PetroChina jumping to its highest close since January 2020. Some pharmaceutical stocks rebounded after a slump yesterday, with Shanghai Fosun Pharma surging 13%. Sentiment toward Chinese property developers soured further after Fantasia Group said it failed to repay some maturing U.S.-dollar bonds.
Markets in mainland China are closed until Friday for the Golden Week holiday. Japanese stocks were dragged lower by falls in tech and electronics stocks, as the prospects of economic reopening triggered the unwinding of bets for more digital transactions. The Nikkei Stock Average lost 2.2%. Investors are focusing on any policy-related developments from the new Prime Minister Fumio Kishida government.