The ASX is set to fall today, despite finishing 7 points (0.09%) higher yesterday at 8,205 led by Real Estate (+1.67%), Telcos (+0.35%) and Industrials (+0.30%).
The Utilities (-0.41%), Consumer Discretionary (-0.35%) and Consumer Staples (-0.13%) sectors were the main drags.
ASX 200 futures are down 0.3% to 8,215 points after the US markets closed.
“The ASX200 edged higher in cautious trading yesterday as investors await updates from the Middle East following the recent spike in geopolitical tensions. Adding to the cautious tone, traders were unwilling to add to positions ahead of tonight's crucial US labour market update, and with Chinese traders still absent due to the Golden Week holiday,” IG Markets analyst Tony Sycamore said.
"Looking at individual performances, lithium stocks declined following reports that two US investment banks were seeking buyers for a substantial parcel of Pilbara Minerals Ltd (ASX:PLS) shares at a 4% discount to Wednesday's closing price of A$3.31.
"Pilbara's shares dropped 4.83% to A$3.15, while Liontown Resources (ASX:ASX:LTR) Ltd fell 4.97% to A$0.77, and Vulcan Energy (ASX:VUL) Resources Ltd (ASX:VUL, OTC:VULNF, ETR:VUL) slid 2.55% to A$4.21.
"In contrast, Sigma Pharmaceuticals Ltd surged 8.40% to A$2.06, marking its third consecutive session of gains.
"The company is refining details of its proposed merger with Chemist Warehouse, offering court-enforceable undertakings to address competition concerns. The market appears optimistic that these measures could secure regulatory approval for the deal."
US markets lower
Middle East tensions are having an impact on US confidence. Equity markets ended lower overnight.
“Further heightening Middle East anxieties, President Biden confirmed that an Israeli strike on Iran's oil facilities had been discussed, sending crude oil prices surging over 5%,” Sycamore stated.
“We remain of the view that the most likely response will be strategic Israeli strikes on critical Iranian weapons factories and military objectives with oil infrastructure left untouched. Nonetheless, the situation is fluid and taking out oil infrastructure would send a powerful message.”
In economic news, initial jobless claims increased by 6,000 to 225,000 last week but remain lower than early September levels.
The Institute for Supply Management (ISM) Services Index surged by 3.4 points to 54.9, exceeding the consensus forecast of 51.7 and marking the highest level since February 2023. New orders saw a strong increase, though the employment component declined to 48.1.
Looking ahead, nonfarm payrolls are expected to rise by 140,000 in September, with forecasts ranging from 70,000 to 220,000. The unemployment rate is anticipated to hold steady at 4.2%. Revisions are likely, as adjustments have been made in eight of the past 12 months. T
he Federal Reserve's 50 basis point cut last month is expected to mitigate downside risks if the payroll data falls short of expectations. The rates market is currently pricing in 33 basis points of Fed rate cuts for November.
European markets
European sharemarkets closed lower on Thursday, as investor sentiment was dampened by ongoing conflict in the Middle East.
The automotive sector took a hit, dropping 2.1% amid reports that the European Union may implement tariffs of up to 45% on Chinese electric vehicle (EV) manufacturers, a move that has faced opposition from European carmakers. Stellantis shares fell 4%, while Volvo declined over 3%.
- The continent-wide FTSEurofirst 300 index dropped 0.9%.
- In London, the UK FTSE 100 index edged down 0.1%.
Reviving China’s economy
Christopher Broadley, Portfolio Manager at Insight Investment gives his take on China’s economic revival.
“Efforts to revive China’s economy are paying off, with monetary and fiscal stimulus powering Chinese equities to their second-best month of returns in five years in September. The equity market had been shunned by investors since the global reopening from Covid, with underperformance compounded by a major property slump.
“Questions remain around the long-term growth outlook, but these new measures have certainly bolstered this previously stumbling economy. Within our portfolios, we have positioned for further volatility, seeking to benefit from outsized moves in either direction.”
Currencies and commodities
Currencies
Currencies weakened against the US dollar during European and US trade.
- The Euro declined from US$1.1046 to US$1.1009, closing near US$1.1030.
- The Australian dollar slipped from US68.75 cents to US68.30 cents, ending near US68.40 cents.
- The Japanese yen fell from JPY146.33 per US dollar to JPY147.13, closing near JPY146.90.
Commodities
Global oil prices surged by 5% on Thursday amid concerns over a potential escalation in the Middle East, which could disrupt global crude supply.
- Brent crude rose by US$3.72, or 5%, to US$77.62 a barrel.
- US Nymex crude gained US$3.61, or 5.1%, to US$73.71 a barrel.
Base metal prices dropped on Thursday, with copper futures down 2%, impacted by geopolitical tensions, a strong US dollar, and uncertainty regarding China's stimulus measures.
- Aluminium futures slid 1.1%.
- Gold futures rose US$9.50, or 0.4%, to US$2,679.20 an ounce, as safe-haven demand from Middle Eastern tensions offset pressure from a stronger US dollar.
- Spot gold traded near US$2,656 an ounce at the US close.
- Iron ore futures dipped by US98 cents, or 0.9%, to US$108.31 a tonne on Thursday, as stronger-than-expected US jobs data and fading gains from China's economic stimulus weighed on the market.