Metals rise to help offset US falls – The Market Herald

Futures action points to a fourth consecutive positive start for the Australian equity market, with strength in commodities helping to offset a mixed overnight on Wall Street.

ASX Futures Contracts rallied 26 points or 0.38%. The S&P/ASX 200 closed near a three-week high yesterday after trading at its highest level since mid-September.

Industrial metals surged overnight after China moved to lift the yuan to its lowest level in 15 years. Copper and aluminum jumped more than 3%. The Australian dollar retreated towards 65 US cents as the greenback retreated.

Oil and gold also rose. Iron ore ticked lower.

Wall Street

Major Wall Street indices ended mixed as disappointing tech results weighed on the Nasdaq and S&P 500. The Dow Jones rose slightly on a positive result from Visa and after the Bank of Canada raised interest rates lower than expected, heightening hopes of a similar cut by the Federal Reserve.

The S&P500 was down 29 points or 0.74% for its first loss in four sessions. The Nasdaq Compound lose 228 points or 2.04%. The Dow Jones Industrial Average hung on a slim gain of two points or 0.01 percent.

Heavily weighted tech stocks fell after Microsoft and Google’s parent company Alphabet missed expectations. Low revenue forecasts and soft cloud revenue helped push Microsoft down 7.72%. Alphabet fell 9.14% as a drop in online advertising took a severe toll on earnings and earnings.

The grim prospects of Big tech weighed in on Apple and Facebook owner Meta Platforms ahead of their trading updates shortly after the closing bell this morning. Apple fell 1.96%. Meta lost 5.59%.

Major indexes rallied mid-session after the Bank of Canada surprised the market by raising its benchmark rate by 50 basis points. Most economists polled by Dow Jones had predicted another 75 basis point rise.

“Central banks are starting to blink,” Paul Kim, CEO of Simplify ETFs, told Reuters. “It’s part of the larger trend and supports the (Fed’s) ‘pivot’ narrative.”

The US dollar index, which weighs the greenback against a basket of six major currencies, fell more than 1%. The fall came as Chinese state banks sold the greenback to support the struggling yuan. The Chinese currency hit a 15-year low this week amid concerns about a slowing economy.

“The near-parabolic rise in the U.S. dollar against major currencies has eased as data releases, including manufacturing, housing and even the seemingly stubborn labor market, suggest the economy is slowing in response to headwinds. higher interest rates,” Quincy Krosby, chief global strategist at LPL Financial, said. “The stronger dollar has become a major headwind for multinationals in the S&P 500, especially amid weaker global demand.”

The Dow Jones was boosted by an earnings beat of Visa. Shares of the financial services giant jumped 4.66%.

Australian Perspectives

The S&P/ASX 200 seems keen to ignore a mixed session on Wall Street, buoyed by strong gains in industrial metals (see below) and a sharp rise in the dollar.

Resource stocks will likely do the heavy lifting if the market is to secure its first four-session winning streak since the first half of September. Energy leads in the United States, with an increase of 1.38%. Base materials firmed 0.67%.

Commodities rallied as China’s intervention in currency markets made dollar-denominated commodity prices cheaper for Chinese buyers. Commodity prices have cooled this year as the US dollar hit a 20-year high.

The fall of the greenback boosted the Australian dollar dollar 1.71% to 64.93 US cents.

Healthcare +1.12%, Consumer Staples +0.65% and Financials +0.28% were also strong in the US. The three sectors dominated by Big tech lost between 1.05 and 4.75%.

Weighing against a positive finish today is the fact that the Aussie benchmark came up against technical resistance the whole week. A breakout today, if successful, would open the door to a run at level 7000.

There are annual general meetings today for the shareholders of Challenger, JB Hi-Fi, Super Retail Group, EBOS, GUD, Data3, APM Human Services, Reliance Worldwide, Corporate Travel Management and Reece.

ANZ announces its results for the second half. Newcrest and champion iron publish quarterly business updates.

IPOs: Conrad Asia Energy (ASX code: CRD) is listed at 12 p.m. AEDT. The company owns several properties off the coast of Indonesia that hold promise for natural gas.

Goods

Copper and aluminum jumped on bets that the US dollar hit its peak for the year as the Federal Reserve joins a global shift to lower rate increases. The greenback fell to a three-week low, pushing down dollar-denominated commodity prices for holders of other currencies

Reference copper on the London Metals Exchange jumped 3.3% to US$7,769.50 per tonne. Aluminum gained 5.2%, nickel 0.2%, lead 1.2%, zinc 2.3% and tin 1.1%.

U.S.-traded copper rebounded 15 cents or 4.4% on comex at US$3.545 per pound.

BHPCertificates of deposit traded in the US rose 2.8% despite pressure on iron ore (see below). The miner’s UK listing firmed 2.46%. Rio Tinto gained 3.38% in the US and 2.74% in the UK.

Precious metals also benefited from the fall of the dollar. Jim Wyckoff, principal analyst at Kitco, said recent action suggested the US dollar index had “reached a major high and US equity indices had hit major lows”.

Gold for December delivery, it settled down $11.20 or 0.7% to $1,669.20 an ounce, its highest level in about two weeks. Silver climbed 14 US cents or 0.7% to hit US$19.486 an ounce. The NYSE Arca Gold Bugs Index added 2.96%.

Oil rose as a drop in U.S. gasoline inventories helped offset an increase in crude supply. Brent crude settled at US$2.17 or 2.3% higher at US$95.69 a barrel.

Iron-ore slipped to an eight-week low in Chinese trade amid evidence of slowing demand for steel as the global economy slows.

“Major steel mills in China saw inventories rise 8.6% m/m in October amid subdued demand and rising production,” said Daniel Hynes, senior commodities strategist at ANZ. “Sentiment remains fragile as concerns persist over the real estate sector. House prices in major cities fell for the 13th month in a row, despite government policies aimed at supporting the market.

The most traded January ore contract on the market Dalian Commodity Exchange fell 1.3% to 662.50 yuan (US$91.25) per ton.

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