Wall St tracked lower on Friday which points to a slow start for the ASX today. The S&P 500 ended a three-week winning streak, hit by a late selling which left the benchmark index 0.4% lower and in the red for the week. The Nasdaq composite lost 0.7%, while the Dow Jones ended 0.1% lower.
Locally, futures point to a decline of 35 points, or 0.5%, at the open.
Last week, the ASX200 finished 0.37% lower at 7767.
According to IG Markets analyst Tony Sycamore the market was “weighed down by a red-hot inflation report for May, which increased the chances of an RBA rate hike before year-end”.
At a sector level, the Real Estate (-3.53%), Consumer Discretionary (-1.29%), Materials (-0.84%) and Utilities (-0.52%) sectors were the main drags. The IT (+2.67%), Energy (+0.93%) and Financials (+0.16%) sectors outperformed.
“This week, the main event on the local calendar is the RBA meeting minutes (Tuesday) from the June Board meeting,” Sycamore said.
“Following last week's hotter-than-expected May inflation data, the minutes will be closely scrutinised to see how close the RBA was to raising rates in June and for any clues as to whether May's hot inflation data might be enough to trigger a rate hike at the August meeting.
"The Australian rates market starts the week pricing in 8bp (32% chance) of RBA rate hikes for August with a total of 17bp priced for November.”
What happened in the US?
US stock markets fell on Friday night despite cooler PCE inflation, driven by political uncertainty following the first US Presidential debate and month-end/quarter-end rebalancing flows.
The May PCE inflation report indicated a deceleration in inflation, increasing confidence that the Federal Reserve can begin cutting rates in September. Headline PCE increased 2.6% year-on-year in May, down from 2.7% previously. Core PCE eased to 2.6% year-on-year from 2.8% prior.
The US rates market starts the week pricing in 17 basis points of rate cuts for September and 48 basis points before year-end.
This week, key events for US equity markets include the FOMC meeting minutes, ISM Manufacturing and Services PMIs, and Non-Farm Payrolls (NFP). Initial jobless claims recently hit a 10-month high of 243,000, while continuing claims rose to their highest since November 2021, suggesting further cooling in the labour market.
Asian markets
Asian markets are expected to open with mixed performances. Hang Seng futures closed approximately 0.40% lower on Saturday morning, indicating a weaker open.
This is influenced by the fall in the NBS Composite PMI to 50.5 in June, marking its lowest in six months. Additionally, diminishing expectations that Chinese authorities will announce significant stimulus measures at the upcoming Third Plenum contribute to the anticipated weak performance.
Conversely, Nikkei futures suggest a gain of around 0.6% at the open. The sustainability of these gains will depend on the details of this morning's Tankan survey, especially regarding business sentiment and any changes in the assumed USD/JPY level.
Euro markets
Fell on Friday on French political uncertainties ahead of weekend elections. The personal and household goods sector shed around 1%, dragged by a 3% fall in French beauty giant L'Oreal after its CEO gave a lower market growth forecast.
- The continent-wide FTSEurofirst 300 index dipped 0.2%. The index fell 1% in June but was up 0.03% in the second quarter and 7.6% in the first half of 2024.
- In London, the UK FTSE 100 index was down 0.2% on Friday and fell 1.3% in June. The index gained 2.7% in the second quarter and ended 5.6% higher over the first half of the year.
Currencies
In European and US trade, currencies showed strength against the US dollar.
- The Euro increased from US$1.0689 to US$1.0723, closing near US$1.0715.
- The Australian dollar rose from US66.21 cents to US66.83 cents, ending close to US66.65 cents.
- The Japanese yen appreciated from 161.05 yen per US dollar to JPY160.26, closing near JPY160.85.
Commodities
Global oil prices were mostly unchanged on Friday, balancing increased crude supplies against rising Middle East tensions.
- Brent crude edged up by US2 cents (0.02%) to US$86.41 per barrel.
- The US Nymex crude fell by US20 cents (0.2%) to US$81.54 per barrel.
- For the week, Brent crude rose 1.4% and Nymex gained 1%, with both benchmarks increasing by about 6% over the month.
Base metal prices rose on Friday as the US dollar weakened.
- Copper futures were up 1.4% and aluminium futures increasing by 0.9%. Despite this, copper recorded a sixth consecutive weekly decline, down 2.3%.
- Aluminium rose by 1%.
- Gold futures climbed by US$3 (0.1%) to US$2,339.60 per ounce, marking over a 4% gain for the June quarter. Spot gold was trading near US$2,325 per ounce at the US close.
- Iron ore futures remained stable at US$106.51 per tonne on Friday but recorded a weekly loss of 0.4% due to high portside inventories in China.
What's next for Australian market?
As he does each week, Dale Gillham, chief analyst of financial services company Wealth Within, looks at what to expect from the local market in the coming weeks.
“Last week showcased a tale of two halves for the All Ordinaries index. The market spent most of the week declining, only to see a surge on Thursday, pushing the index back above the 8,000-point level.
“What's particularly notable is the resilience of the 7,900-point level as support for the All Ords. The week marked the fifth instance this year where sellers attempted to push the price below 7,900, only for buyers to step in forcefully and reverse the trend. While this indicates strong buyer support, the market remains stuck in a sideways movement between 7,900 and 8,100 points.
“Although the current market resembles a yo-yo, the future looks extremely promising. July is typically the best month of the year in terms of gains in the market from a seasonal perspective.
“So, as we enter the best month of the year, combined with the built-up energy from the recent sideways movement, we are set for potential growth over the next four weeks.
"As such, keep a close eye on the materials sector, as it could present lucrative opportunities during what is expected to be an explosively bullish July. This might be your chance to capture the best returns for the rest of the year, so be prepared to take advantage if the opportunity arises.”
The small cap front
The S&P/ASX Small Ordinaries (XSO) finished Friday 0.14% higher to 2,972.90 but fell 1.06% for the week.
It has been a steady start on the news front this morning and you can read about the following and more throughout the day.