Opening Call: The Australian share market is to open lower.
U.S. stocks had mixed results as the global oil benchmark reached its highest level since October 2018. The yield on the 10-year Treasury topped 1.5% for the first time since June earlier in the session, before settling at 1.49%. The U.S. dollar ticked higher to 87.95. Gold prices ticked up just slightly.
Australia’s most populous state, New South Wales, mapped out plans for easing Covid-related restrictions over the coming months.
U.S. stocks wobbled, bond yields rose and oil hit its highest level in nearly three years as investors bet on further economic reopening but remained concerned about supply-chain disruptions. The S&P 500 lost 0.3%. The Dow Jones Industrial Average ticked up 0.2% while the tech-heavy Nasdaq Composite Index fell 0.5%.
“We’re easing off that extremely accommodative monetary policy stance as growth improves and we see higher inflation,” said Amy Magnotta, co-head of discretionary portfolios at Brinker Capital Investments. “Then when the economy should meet the Fed’s target of growth and employment perspective, we could see further tightening in rising interest rates.”
Gold futures eked out a modest gain, for the second session in a row, as Treasury yields strengthened but eased off the session’s highs. Investors continued to react to the Federal Reserve’s signalling that it will taper purchases of billions in government debt and mortgage-related bonds as the U.S. economy recovers from Covid-19.
“With downside momentum seemingly slowing, gold could see some reprieve in the near term but the broader outlook isn’t great,” said Craig Erlam, senior market analyst at Oanda, in a market update. December gold futures edged up by 30 cents to settle at $1,752 an ounce.
Prices for the U.S. and global benchmark crude oil settled at the highest in almost three years, and natural-gas futures rallied back to levels not seen since February 2014, buoyed by tight U.S. supplies and strengthening demand. “Both oil and natural gas are expected to continue higher in the months ahead as fundamentals decidedly favour the bulls right now, while momentum and technicals both point to higher prices in the near to medium term,” said Tyler Richey, co-editor at Sevens Report Research.
November Brent crude, the global benchmark, rose 1.8% to settle at $79.53 a barrel on ICE Futures Europe. November West Texas Intermediate crude rose 2% to settle at $75.45 a barrel on the New York Mercantile Exchange. Both front-month WTI and Brent crude contracts finished at the highest levels since October 2018, according to Dow Jones Market Data.
Major currencies were mixed against the US dollar in European and US trade. The Euro fell from highs near US$1.1720 to lows near US$1.1685 and was near US$1.1700 at the US close. The Aussie dollar rose from lows near US72.50 cents to highs near US72.95 cents and was near US72.90 cents at the US close. And the Japanese yen fell from 110.60 yen per US dollar to JPY111.05 and was near JPY111.00 at the US close.
European sharemarkets were mixed on Monday. The pan-European STOXX 600 index fell by 0.2% with declines in tech stocks offsetting gains of 2.8% for both energy and banks. But the German Dax index rose by 0.3% on the prospect that the centre-left Social Democrats will attempt to form a coalition government after the federal election. And the UK FTSE index gained 0.2%. In London trade, shares in Rio Tinto fell by 0.6% but shares in BHP rose by 0.5%.
Earlier Monday, Chinese stocks finished mixed, hurt by losses among miners and steelmakers, even as major liquor makers enjoyed their best day in years. A few cyclical stocks weakened further from an earlier rally. The Shanghai Composite Index dropped 0.8%, the Shenzhen Composite Index declined 1.1% and the ChiNext Price Index gained 0.7%. Hong Kong’s benchmark Hang Seng Index edged 0.1% higher, as energy majors gained amid rising oil prices.
Property developers were broadly lower as Evergrande-related fears continued to weigh. The Nikkei Stock Average settled largely unchanged as gains in the airline, railway and bank stocks helped offset losses in tech and shipping shares. Reports of the potential lifting of the Covid-19 state of emergency by the government boosted travel-related sectors while triggering profit-taking in stocks related to chips and e-commerce. The broader market index Topix fell 0.1%. Developments over the ruling-party chief election in Japan, set for Wednesday, are being closely watched.