The Australian share market looks like it will open flat against a backdrop of climbing bond yields, a falling local dollar and uncertainty in the US.
ASX futures pointed down 13 points or 0.2% to 7,055 early this morning – looking better than they did before a late rally on Wall Street, when the slump was closer to 40 points.
The Australian dollar was 0.7% lower after earlier falling below 63.40 US cents as the greenback rose for the sixth day in a row.
On Wall Street, the Dow lost 0.2%, while the Nasdaq gained the same amount and the S&P added just 0.03%, with a potential US government shutdown imminent – again – and a raft of strikes, including by auto workers, playing on investors’ minds.
European shares fell for the fifth day yesterday, hitting six-month lows.
The continent-wide FTSEurofirst 300 index fell by 0.1% and the large-cap UK FTSE 100 index slipped 0.4%.
US government shutdown looms
In what seems like a familiar but dangerous power play, the US Congress is headed towards a shutdown this weekend, with Democrats and Republicans deadlocked on spending, and Republicans blocking the passage of bills needed to keep the government going.
With a new fiscal year set to begin on October 1, there is no sign that House Republicans are ready to budge on the federal debt. Members of the Senate have bought themselves more time with a bipartisan bill to extend funding for a while longer.
Without a similar bill from the Republican-led House, it remains to be seen whether the US can avoid losing its top-tier credit rating this time around.
Currencies, crude and commodities
In a day marked by currency fluctuations, the Euro, Australian dollar and Japanese yen all weakened against the US dollar in European and US trading sessions.
The Euro dipped from US$1.0572 to near US$1.0500, while the Australian dollar retreated from 63.86 US cents to around 63.50 US cents at the US close. Similarly, the Japanese yen eased from 148.96 to nearly JPY149.65 per US dollar by the US closing bell.
Commodities saw considerable movement as well, highlighted by a significant uptick in global oil prices. Brent crude surged by US$2.59 or 2.8%, reaching US$96.55 a barrel, its highest point since November 2022, while US Nymex crude advanced by US$3.29 or 3.6%, touching US$93.68 a barrel, a peak not seen since August 2022.
This surge came on the back of a larger-than-expected drop in US crude inventories, which fell by 2.2 million barrels last week to 416.3 million barrels, far exceeding the predicted 320,000-barrel drop.
Base metals and other commodities also witnessed a mixed bag of results. Copper futures edged up by 0.1%, even as they hovered near a four-month low, following news of China Evergrande (HK:3333) Group's chairman being under police surveillance.
Meanwhile, aluminium futures increased by 0.2%. On the contrary, gold futures saw a decline of US$28.90 an ounce or 1.5% to US$1,890.90, and iron ore futures dipped by US9 cents or 0.1% to US$120.84 a tonne, influenced by a significant drop in Chinese industrial profits over the first eight months of the year.
What’s happening in small caps?
The S&P/ASX Small Ordinaries closed at 2,710.83 yesterday, adding 3.79% on the previous day.
Making news this morning, which you can read more about throughout the day with Proactive are: