Opening Call: The Australian share market is to open higher.
U.S. stocks dropped following data showing consumers’ short-term view of the U.S. economy fell near a decade low. The yield on the 10-year Treasury settled higher before edging back down to 3.19%. The WSJ Dollar Index strengthened to 97.36. Oil prices continued to rebound from the lows they reached last Thursday. Gold prices edged lower.
Australia’s S&P/ASX 200 gained 0.9%, stitching together a fourth consecutive gain thanks to gains by commodity stocks. Strong gains by shares of iron-ore miners, energy explorers and power retailers helped the benchmark index overcome a weak lead from U.S. equities. Major bank stocks pared strong week-opening gains, while the tech and consumer discretionary sectors fell.
U.S. stocks slumped, giving up early gains and falling for a second consecutive day as investors parsed fresh economic figures for clues about the pace of monetary-policy tightening. The Dow Jones Industrial Average dropped 1.6%, erasing an earlier gain of 1.4%. The S&P 500 lost 2%, while the technology-focused Nasdaq Composite Index fell 3%. Stocks lost their early momentum after data from the Conference Board showed consumers’ short-term outlook for the U.S. economy dropped sharply to its lowest point in nearly a decade.
Weak economic readings fueled a stock market rally last week as investors hoped the Federal Reserve might slow its monetary-policy tightening, in a paradoxical outlook where bad news was good news. However, the consumer reading is “bad news that’s bad news,” according to Mike Mullaney, director of global markets research at Boston Partners. “If you have inflation expectations going up to the extent they are right now, it just means the Fed is going to be that much more aggressive in squashing inflation,” he said.
Gold prices fell to post their lowest settlement in nearly two weeks, but remained mired in a range between $1,800 and $1,880 since mid-May. August gold prices fell 0.2% to settle at $1,821.20 per ounce on Comex, the lowest most-active contract finish since June 15, FactSet data show. Prices for the precious metal had fallen toward session slows immediately after the release of U.S. consumer confidence data for June, before paring those losses.
“Traders know that it is only a matter of time before the economic data officially confirms that the U.S. economy has fallen into a recession and that headline would spur more interest in a risk-off asset” such as gold, said Naeem Aslam, chief market analyst at AvaTrade.
Oil futures settled higher, as doubts over the ability of Saudi Arabia and the United Arab Emirates to significantly boost output and unrest in Ecuador and Libya helped lift prices up for a third session in a row to their highest finish since mid-June. West Texas Intermediate crude for August delivery rose 2% to settle at $111.76 a barrel on the New York Mercantile Exchange. That was the highest front-month contract finish since June 16, according to Dow Jones Market Data.
August Brent crude added 2.5% to $117.98 a barrel on the ICE Futures Europe, also the highest since June 16. Given very limited spare capacity, “we think Saudi Arabia will seek to be judicious about how it deploys its remaining barrels and will likely incrementally increase output rather than simply dumping all the barrels at once and risk losing control of the market,” said Helima Croft, head of global commodity strategy at RBC Capital Markets.
Major currencies were weaker against the US dollar in European and US trade. The Euro fell from highs near US$1.0602 to lows near US$1.0504 and was near US$1.0520 at the US close. The Aussie dollar fell from highs near US69.63 cents to lows near US69.05 cents and was near US69.10 cents at the US close. And the Japanese yen eased from 135.36 yen per US dollar to JPY136.36 and was near JPY136.20 at the US close.
European sharemarkets edged higher on Tuesday. The panEuropean STOXX 600 index rose by 0.3% with energy stocks up 2.0% as oil prices lifted. The German Dax index added 0.4% and the UK FTSE index gained 0.9%. In London trade, shares of Rio Tinto rose by 2.0% and BHP shares added 1.6%.
Earlier Tuesday, Chinese shares ended higher after authorities said that they will ease quarantine requirements for international travelers entering the country. The Shanghai Composite Index rose 0.9%, the Shenzhen Composite Index advanced 1.2% and the ChiNext Price Index added 0.3%. Aviation stocks led the gains and tourism-related stocks also gained. Hong Kong stocks ended higher, as the market reversed losses in late afternoon trade.
The benchmark Hang Seng Index rose 0.9%. Macau casino operators led gains and restaurant companies further supported the market. Japanese stocks ended higher, led by gains in auto and energy stocks as the yen’s recent weakness raised hopes for earnings growth, offsetting concerns about higher operation costs. The Nikkei Stock Average rose 0.7%. Investors are focused on the Group of Seven summit and its implications for global trade and commodity prices.