The Australian sharemarket is tipped to open lower following a retreat on Wall Street overnight, with ASX 200 futures slipping -1.1% to 7,759 points early this morning.
Investors were spooked on Thursday by mixed economic data and corporate announcements.
Nvidia provides temporary boost
“In our ASX200 Afternoon report yesterday, we said that if there is one cure for a bond market headache in equity markets, it's the juggernaut called AI, led by poster child Nvidia,” wrote IG senior analyst Tony Sycamore.
“However, that theory was tested overnight as US equity markets tumbled (despite Nvidia closing 9% higher) following robust US economic data.”
Nvidia shares surged 9.3%, surpassing the US$1,000 per share mark, after the artificial intelligence chip company forecast quarterly revenue above estimates and announced a 10-for-1 stock split.
This initially boosted the Nasdaq and S&P 500 indexes to intraday records. But the markets lost ground as data showed US business activity accelerated in May at the fastest pace in two years, heightening inflation concerns and reinforcing speculation that the US Federal Reserve will maintain higher interest rates for a longer period.
The Dow Jones index fell by 606 points, or 1.5%, dragged lower by a 7.6% plunge in Boeing (NYSE:BA) shares after the US aircraft manufacturer forecast negative free cash flow in 2024 due to sluggish deliveries.
The S&P 500 index slid 0.7%, and the Nasdaq index shed 65.5 points, or 0.4%.
European share markets mixed
European share markets were similarly mixed on Thursday. Technology stocks rose 1.2%, buoyed by robust results from Nvidia.
By contrast, utilities dropped 2.7%, with UK electricity and gas company National Grid (LON:NG) plunging 10.9% following the announcement of a £7 billion equity raise in its full-year results.
HCOB's euro zone composite Purchasing Managers' Index (PMI) rose to 52.3 in May from April's 51.7, slightly above expectations.
The continent-wide FTSEurofirst 300 index gained 0.1%, while the UK FTSE 100 index closed 0.4% lower.
US economic data highlights
In US economic data, initial jobless claims fell by 8,000 to 215,000 last week, better than the expected 220,000.
New home sales slid 4.7% in April to a 634,000 annualised rate, missing the forecast of 678,000.
The S&P Global manufacturing PMI rose from 50 in April to 50.9 in May, while the services PMI increased from 51.3 to 54.8, both exceeding expectations. The Kansas City Fed factory index improved from -8 in April to -2 in May, and the Chicago Fed national activity index fell from -0.04 in April to -0.23 in May.
“Initial jobless claims declined by 8k to 215k, which suggests last week's pop to 223k was due to the holiday distortions,” Sycamore continued.
“The US composite flash PMI surged to 54.4 in May, up from April 51.3 to its highest level since April 2022.
“Details were strong across both the manufacturing and the services sectors, and we will likely see the Atlanta GDPNow estimate for Q2 GDP revised higher late today.
“This comes hot on the heels of yesterday's FOMC meeting minutes, which revealed that ‘various’ participants would be willing to hike rates further if necessary.
“Expectations of a first Fed rate cut have been pushed back until December, and just 35bp of easing is priced for 2024.”
Currencies and commodities
Currencies weakened against the US dollar in European and US trade. The Euro fell from US$1.0860 to US$1.0803, the Aussie dollar slid from 66.52 US cents to 65.97 US cents, and the Japanese yen eased from 156.52 yen per US dollar to JPY157.16.
Global oil prices fell to their lowest level since February, declining for the fourth consecutive session.
Concerns over higher-for-longer US interest rates impacting demand growth in the world's largest oil market weighed on prices.
The Brent crude price fell by 54 US cents, or 0.7%, to US$81.36 a barrel, while the US Nymex crude price slid by 70 US cents, or 0.9%, to US$76.87 a barrel.
Base metal prices fell on Thursday. Copper futures fell 1% as consumers refused to buy at near-record levels. Likewise aluminium futures slipped 0.7%.
Gold futures dipped US$55.70 or 2.3% to US$2,337.20 an ounce on Thursday as investors grew apprehensive over US rate cut timings and on strength in US business activity.
Spot gold was trading near US$2,327 an ounce at the US close. Iron ore futures fell 11 US cents or 0.1% to US$117.53 a tonne on Thursday.
Market snapshot
- Australian dollar: Flat at 66.04 US cents
- S&P 500: -0.7% to 5,268 points
- Nasdaq: -0.4% to 16,736 points
- FTSE: -0.4% to 8,339 points
- EuroStoxx: +0.1% to 522 points
- Spot gold: Flat at $US2,329/ounce
- Brent crude: -0.5% to $US81.48/barrel
- Iron ore: -2.6% to $US119.30/tonne
- Bitcoin: -0.1% to $US67,695
Source: ABC