Opening Call: The Australian share market is to open higher.
U.S. stocks declined as a reading of U.S. services-sector activity showed growth eased in June. The yield on the 10-year Treasury fell to 1.35%, helping push gold prices to a fourth-straight gain. The WSJ Dollar Index rose to 87.2. Oil prices finished sharply lower as investors tried to figure out what OPEC’s failure to reach a deal could mean for global supplies.
Australia’s S&P/ASX 200 gave up early gains to close 0.7% lower. The benchmark slipped into negative territory shortly before the Reserve Bank announced it would taper government bond-buying from September. Telecommunications, health and tech were the worst-performing sectors.
U.S. stocks fell, retreating from last week’s records. The S&P 500 fell 0.2%, halting its recent winning streak. On Friday, the broad-based index closed at a record for the seventh consecutive trading session, its longest such streak since 1997.
The Dow Jones Industrial Average slid 0.6%, while the technology-heavy Nasdaq Composite added 0.2%. U.S. markets were closed Monday for the Independence Day holiday.
There wasn’t a clear catalyst for losses, which came during light summer trading volumes. Thin trading activity can exacerbate volatility, as many investors are on the sidelines.
Gold futures finished higher for a fourth straight day, helping the precious metal settle at its highest in about three weeks as U.S. Treasury yields dipped to their lowest levels in weeks and as reports indicated that bullion purchases among central banks were gathering steam.
August gold gained 0.6% to settle at $1,794.20 an ounce, touching an intraday peak at $1,815.70.
The session’s climb was sufficient to propel the precious metal toward a golden cross, which occurs when the 50-day moving average crosses above the 200-DMA, widely viewed as a dividing line between longer-term uptrends and downtrends.
The 50-day moving average for gold stood at $1,832.39 an ounce, with the 200-day at $1,832.04, according to FactSet data.
Oil futures sank after the U.S. benchmark hit a six-year high, reflecting uncertainty over the outlook for global crude production a day after talks between the Organization of the Petroleum Exporting Countries and its allies collapsed.
The inability to reach an agreement “initially supported the market under the assumption that no deal would add zero barrels to the market through 2022,” said Robert Yawger, executive director of energy futures at Mizuho Securities, in a note.
That changed in just a few hours, however, giving way “to a fear that no deal might actually see the United Arab Emirates unilaterally add the 600,000 barrels they were seeking to their baseline quota, with other member countries also adding barrels, with the potential for a repeat of the March 2020 price war,” Mr Yawger said.
West Texas Intermediate crude for August delivery fell 2.4% to close at $73.37 a barrel on the New York Mercantile Exchange. The U.S. benchmark traded at a session high of $76.98, its loftiest level since November 2014.
The global benchmark, September Brent crude dropped 3.4% to settle at $74.53 a barrel on ICE Futures Europe, after hitting $77.84 for its highest level since 2018.
Major currencies were mostly weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.1894 to lows near US$1.1807 and was near US$1.1820 at the US close. The Aussie dollar fell from highs near US75.98 cents to lows near US74.80 cents and was near US74.95 cents at the US close. But the Japanese yen rose from 110.91 yen per US dollar to JPY110.52 and was near JPY110.60 at the US close
European share markets fell on Tuesday. The pan-European STOXX 600 index closed down by 0.5% with automobiles and parts stocks down 2.9%. The German Dax index shed 1.0% after German factory orders dropped 3.7% in May (survey: +0.9%). And the oil heavy UK FTSE index dropped 0.9% with shares of BP (-4.1%) and Royal Dutch Shell (-2.1%) both lower. In London trade, shares in Rio Tinto (-2.6%) and BHP (-2.2%) both traded lower.
Earlier Tuesday, Chinese stocks ended the session lower, extending a broad downturn that started late last week. The benchmark Shanghai Composite Index fell 0.1%, while the Shenzhen Composite Index lost 0.3%. The ChiNext Price Index dropped 1.8%.
Losses were led by new-energy companies, as the sector weakened from its gains a day earlier. Consumer stocks such as food and beverage makers and tourism companies further weighed on the market.
Hong Kong stocks also settled lower, extending a losing streak for the sixth straight trading day. The benchmark Hang Seng Index fell 0.3%, with drug makers and biotech firms leading the downturn.
The Nikkei Stock Average advanced 0.2% as gains in energy, steel and railway stocks helped offset losses in pharmaceutical and brokerage stocks. Covid-19 infection trends and containment measures are being closely watched.