Iron ore miners are set to drag the ASX down today, with the ASX 200 trading 37 points lower, down -0.52% as of 8:20 am AEST.
Today’s fall follows yesterday’s red session which saw the local market close 26 points lower, dragged down -0.35% by industrial sectors.
The only highlights at yesterday’s close were Defensives including Telcos, Utilities and Staples, which all outperformed.
The pullback has been expected as the ASX was on a near six-day winning streak.
IG Markets analyst Tony Sycamore put yesterday’s slide down to “the release of the soft Caixin China Services (53.9 vs 56.5 expected) and Composite PMI (52.5 vs 55.1 expected), indicating that the Chinese economy is slipping towards a double dip slowdown.
“While more weak China data isn't great news for the ASX200 (or the AUD/USD) in the short term, more broadly, it will support the AUD/USD and the ASX200 on expectations of an imminent policy response from Chinese authorities.”
Over in the US, equity markets closed lower overnight as the bond market returned to the driver’s seat.
Sycamore says, “While some will point to the release of the FOMC meeting minutes as the catalyst for the rise in yields, nothing in the minutes was new. Policymakers agreed that more hikes would be needed as inflation remains too high and the labour market remains tight.
“On that note, over the next 48 hours, we get four measures of the US labour market. Initial jobless claims, ADP (NASDAQ:ADP) employment, Jolts Job openings and non-farm payrolls.”
Market snapshot
Here’s what we saw (source Commsec):
US markets
Sharemarkets were closed on Tuesday for the Independence Day public holiday. US equity futures were little changed.
The US Government bond market was shut. On Monday, the US 10-year Treasury yield rose by 4 points to 3.86% and the US 2-year Treasury yield lifted by 6 points to 4.94%.
European markets
Edged higher on Tuesday as investors looked ahead to the monthly report on US employment for clues to how high interest rates will rise this year.
Trading in the session was light as Wall Street was closed for the Independence Day holiday. Real estate shares led gains, lifting 2.8%, with Nordic property company Castellum (+5.7%) among the best performers after being re-initiated with a buy recommendation by DNB Bank.
Travel and leisure stocks rose by 0.4% as Irish airline Ryanair (NASDAQ:RYAAY)'s (+0.2%) upbeat monthly traffic numbers helped sentiment for the sector. But banking stocks fell by 0.6%. Figures on German trade showed a 0.1% fall in exports and 1.7% rise in imports in May.
The continent-wide FTSEurofirst 300 index rose by 0.1%.
In London, the UK FTSE 100 index inched lower by 0.1% on Tuesday. Shares of UK banks fell by 0.7% after British Finance Minister Jeremy Hunt backed financial regulator FCA to ensure banks are passing on better savings rates to consumers.
Grocer Sainsbury's shares dropped 1.8% after Britain's second-largest supermarket group failed to raise its profit forecast even after strong sales growth in the first quarter.
Currencies
Currencies were mixed against the US dollar in European and North American trade.
- The Euro fell from US$1.0913 to US$1.0879 and was near US$1.0880 in afternoon North American trade.
- The Aussie dollar lifted from US66.51 cents to US67.04 cents and was near US66.95 cents in afternoon North American trade.
- The Japanese yen firmed from 144.64 yen per US dollar to JPY144.20 and was near JPY144.45 in afternoon North American trade.
Global oil prices climbed by up to 2% on Tuesday as markets weighed August supply cuts by top exporters Saudi Arabia and Russia against a weak global economic outlook.
- The Brent crude price rose by US$1.60 or 2.1% to US$76.25 a barrel.
- The US Nymex crude price lifted US$1.21 or 1.7% to US$71.00 a barrel in after-hours trade. Trading volumes were thin due to the US holiday.
- The copper futures price fell by 0.6% as weak manufacturing data indicated poor demand prospects, including from top consumer China.
- The aluminium futures price rose by 0.5%.
- The gold futures price rose by US$4.10 or 0.2% to US$1,933.60 an ounce in after-hours trade on Tuesday.
Iron ore futures lifted US39 cents or 0.4% to US$110.44 a tonne in Singapore trade on Tuesday as traders brushed aside a report of government-ordered production cuts in China's major steel hub of Tangshan for all of July.
On Monday, Chinese iron ore futures slid US84 cents or 0.8% to US$110.87 a tonne. No price was available on Tuesday due to the US holiday.
What about small caps?
The S&P/ASX Small Ordinaries closed at 2,842.0 and is up 4.72% for the year.
There has been some reasonable activity already today. You can read about the following in more detail throughout the day.