Opening Call: The Australian share market is to open higher.
Australian Market
Australia’s S&P/ASX 200 edged less than 0.1% higher amid gains by health and travel stocks. The benchmark jumped 0.8% ahead at the open but steadily gave up most of its gains amid weakness from commodity stocks. The health sector rose 2.6%, powered by Ramsay Healthcare’s 24% surge on a takeover proposal by a KKR-led consortium.
U.S. stocks were mixed as investors assessed the impact of higher inflation on corporate earnings and ahead of more results from major companies. The S&P 500 pared gains and slipped 0.1%, while the tech-focused Nasdaq Composite Index fell about 1.2%. The Dow Jones Industrial Average advanced 0.7%. Stocks have had a strong start to the week, lifted by earnings reports that showed companies have largely been able to generate growth despite tightening monetary policy and the highest inflation in four decades.
Netflix’s report after hours on Tuesday disappointed, while Procter & Gamble reported its biggest jump in sales in two decades, leading investors to closely scrutinize corporate performance in an environment with rising prices. “We are living in a year of higher inflation and that will cause problems for some companies,” said Luc Filip, head of investments at SYZ Private Banking. “What we are trying to assess is really the pricing power of a company, and some will see their profitability come under pressure if they don’t have this.”
Commodities
Gold futures ended lower for a second straight session, extending their pullback from the five-week high seen earlier this week. The precious metal settled at its lowest level in over a week, and the pullback in prices could be “leading to a buying opportunity for gold bugs,” said Michael Armbruster, managing partner at Altavest, arguing that a price in the $1,920s would be a good starting point to buy the metal.
If the 10-year Treasury yield “relents and starts falling based on U.S. growth concerns, we think that dynamic could propel gold prices well above $2,000 in the months ahead,” he said. “It’s more complicated with quantitative tightening on the horizon, but much of that may already be priced into the treasury market by now” and despite the big rise in Treasury yields, “gold has been performing quite well.” Gold prices for June delivery fell 0.2% to settle at $1,955.60 an ounce on Comex, the lowest most-active contract finish since April 11, FactSet data show.
Oil Futures
Oil futures ended on a mixed note, with U.S. prices up slightly and global prices down for the session. Concerns over a slowdown in energy demand and uncertainty over if and when Europe will ban Russian oil pressured prices, but the market also found support from an eight million-barrel weekly drop in U.S. crude supplies. The drop in crude inventories reversed nearly all of last week’s 9.4 million-barrel build, despite a “whopper of a 4.7 million-barrel release” from the Strategic Petroleum Reserve and production ticking higher to 11.9 million barrels per day, said Matt Smith, lead oil analyst, Americas, at Kpler, in emailed commentary.
“Higher refining activity, low imports and strong exports have been the driver behind the large draw,” he said. “Strong exports have been driven by a pull to Europe and we should expect strength in the weeks ahead.” West Texas Intermediate crude for May delivery rose 0.2% to end at $102.75 a barrel on the New York Mercantile Exchange on the contract’s expiration day. June Brent crude fell 0.4% to settle at $106.80 a barrel on ICE Futures Europe.
Forex
Major currencies were firmer against the US dollar in European and US trade. The Euro rose from lows near US$1.0805 to highs near US$1.0865 and was near US$1.0850 at the US close. The Aussie dollar rose from lows near US74.10 cents to highs near US74.57 cents and was near US74.48 cents at the US close. And the Japanese yen lifted from 20-year lows near 128.71 yen per US
dollar to JPY127.49 and was near JPY127.80 at the US close.
European Markets
European sharemarkets were firmer on Wednesday. Shares in Danone rose 5.8% after the French food group posted stronger quarterly sales growth, while Heineken rose 5.2% on a sharp lift in
quarterly beer sales. The pan-European STOXX 600 index rose by 0.8%. The German Dax rose by 1.5% and the UK FTSE rose by 0.4%. In London trade, shares of Rio Tinto fell by 4.8% after
reporting weaker iron ore shipments in the March quarter. Shares in BHP fell by 2.9%.
Asian Markets
Earlier Wednesday, Chinese stocks dropped, as the market remained under pressure amid rising concerns over a worse economic slowdown in the second quarter. The benchmark Shanghai Composite Index fell 1.3%, while the Shenzhen Composite Index lost 1.7%. The tech-heavy ChiNext Price Index continued to underperform, losing 3.7%. Coal producers led the downturn, extending recent losses, after Beijing officials signaled intentions to curb excessive coal-price increases.
Hong Kong stocks extended their downturn as the benchmark Hang Seng Index edged down 0.4%. KGI Securities attributed the continued weakness to sharp increases in U.S. Treasury yields and the strengthening dollar. Property companies, including management companies and developers, led the losses. The Nikkei Stock Average gained 0.9% with auto stocks leading the gains. Honda Motor gained 3.6%, Toyota Motor added 3.7% and Nissan Motor advanced 4.7%. Financial stocks were also higher, with Sumitomo Mitsui Financial Group rising 1.6% and Mitsubishi UFJ Financial Group gaining 2.5%.
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