The ASX200 is expected to climb 74.8 points or 0.98% in early trading today according to ASX Futures, responding to new record highs in US markets and similar progress in European markets.
In the opposite story to Australia’s new fears over fresh interest rate hikes, US investors are growing more confident the Federal Reserve may be gearing up for a rate cut in September, while the European Central Bank gave its first rate cut in June although there are no signs of more to follow.
US and European markets
US markets rode optimism over rate cuts to new highs last night – the S&P 500 rose 0.5% or 28 points to 5,537.02, having risen 16.75% for the year to date, while the Nasdaq gained 160 points or 0.88% to 18,188.30 points, both setting a new all-time high.
The Dow Jones was the only major US index to fall, shedding 24 points or 0.1% for a modest dip.
In company news, shares of weight-loss drug manufacturers declined following medical reports suggesting that diabetes and weight-loss drugs could be associated with a higher risk of vision loss.
Novo Nordisk (CSE:NOVOb) (NYSE:NVO) shares fell by 2.9% and Eli Lilly (NYSE:LLY)'s shares dropped by 1%.
Tesla (NASDAQ:TSLA) shares increased by 6.5%, continuing to rise for a seventh consecutive session after reporting better-than-expected delivery figures the previous day. Since early June, Tesla shares have risen by more than 40%, although they are still down slightly for the year.
In Europe, share markets mirrored the gains seen in the US. The continent-wide FTSEurofirst 300 index rose by 13 points or 0.7%. In London, the UK FTSE 100 index increased by 50 points or 0.6%.
US bonds and economic data reports
Several reports on US economic data were released overnight, offering some insight into how one of the largest economies in the world is tracking.
The ADP (NASDAQ:ADP) Employment report showed an increase of 150,000 jobs in June, falling short of the 165,000 forecast by economists and down from a revised 157,000 in May.
Initial Jobless Claims rose by 4,000 to a 10-month high of 238,000 for the past week, above the survey expectation of 235,000.
Continuing Jobless Claims reached their highest levels since November 2021, increasing by 26,000 to 1,858,000, surpassing the survey's estimate of 1,840,000.
Factory Orders declined by 0.5% in May, contrary to the anticipated rise of 0.2%. Meanwhile, Durable Goods Orders edged up by 0.1%, in line with expectations.
The ISM Services PMI dropped to 48.8 in June from 53.8 in May, indicating the largest contraction since April 2020 and below the surveyed forecast of 52.7.
US government bonds saw yields fall and prices rise on Wednesday, supported by signs of a moderating labour market.
The US 10-year Treasury yield decreased by 8 basis points to 4.35% and the US 2-year Treasury yield fell by 3 basis points to 4.71%.
Minutes from the US Federal Reserve's June 11 policy meeting emphasised the need for more evidence to support the case that inflation is moving towards the Fed's 2% target.
Currencies and commodities
Currencies rose against the US dollar as the Greenback fell to its lowest levels in over three weeks in response to falling bond yields.
- The Euro increased from US$1.0740, ending near US$1.0780 at the US close.
- The Australian dollar surged from US$0.6670, finishing near US$0.6705.
- The Japanese yen appreciated from 161.80 yen per US dollar, closing near JPY161.70.
Global oil prices climbed back to two-month highs on Wednesday after retreating the previous day.
Data from the American Petroleum Institute (API) showed US crude inventories fell by 9.163 million barrels last week, significantly more than the forecasted 150,000 barrels, marking the largest weekly drawdown since August 2023.
Brent crude prices rose by US$1.10 or 1.3% to US$87.34 a barrel, while the US Nymex crude price increased by US$1.07 or 1.3% to US$83.88 a barrel.
Commodity prices, including base metals, generally firmed on Wednesday, supported by the decline in the US dollar.
Copper prices rose for a fourth consecutive session, up 2.5%. Aluminium futures saw oversupply concerns ease, with prices rising by 1.4%.
Gold futures prices rose by US$36.00 or 1.5% to US$2,369.40 an ounce, trading at their highest levels in a month.
Spot gold was trading near US$2,356 an ounce at the US close. Iron ore futures gained US$2.94 or 2.7%, reaching US$113.26 a tonne on Wednesday.
On the small cap front
The ASX Small Ordinaries gained 10.8 points for 0.37% yesterday, outpacing the ASX200’s 0.17% gain.
You can read about the following and more throughout the day on our website.