A big week of corporate earnings and economic data looks set for a soft start following losses on Wall Street as tech stocks sagged and US-China relations deteriorated.
ASX SPI200 index futures declined 27 points or 0.5 per cent after the three major US indices logged weekly deficits. Gold settled at an all-time high.
The S&P 500 dropped 20 points or 0.62 per cent on Friday to seal a 0.7 per cent loss for the week. The Dow shed 182 points or 0.68 per cent on the day, extending its weekly decline to 0.8 per cent. The Nasdaq shed 98 points or 0.94 per cent for the session and 1.3 per cent for the week.
The S&P/ASX 200 looks set to start today’s session around its lowest level in a week after falling on Friday. The local benchmark skidded 71 points or 1.2 per cent at the end of a stop-start week that brought sharp declines for tech stocks as a Nasdaq sell-off gathered pace.
Intel set the tone for a red session in the US on Friday after warning of a delay in matching rival AMD’s smaller, faster computer chips. The Dow component’s share price plunged 16.2 per cent, while AMD surged 16.5 per cent. Most of the so-called market-leading Big Tech group of stocks followed Intel lower. Facebook shed 0.8 per cent, Alphabet and Microsoft 0.6 per cent and Apple 0.3 per cent.
“Concerns of another technology bubble are rising,” Keith Lerner, chief market strategist at Truist/SunTrust Advisory, wrote. “There is also growing concentration risk, with the top five stocks now accounting for 22 per cent of the S&P 500 Index.”
Sino-US relations took another turn for the worse after China ordered the closure of a US consulate in Chengdu in retaliation for a US order to shut a Chinese consulate in Houston. The Shanghai Composite plunged 3.9 per cent on Friday in a sign of mounting concern.
The US quarterly earnings season hits its stride this week, with Facebook due to report on Wednesday night and Apple, Alphabet and Amazon on Thursday. Here, the local quarterly reporting season peaks on Wednesday. Rio Tinto is due to deliver interim earnings a day later. CIMIC, Janus Henderson, GUD, CreditCorp and Emeco Holdings are also scheduled to report this week. Investors will be on alert for profit warnings ahead of next month’s full-year reporting season.
Wednesday’s quarterly inflation report is likely to be a highlight of the domestic economic calendar, but as always, events on Wall Street will dictate market direction. US investors are bracing for what are expected to be dire second-quarter GDP data on Thursday. The Federal Reserve meets this week and is due to announce any change to monetary policy on Wednesday night.
Stimulus negotiations in Washington will also capture headlines ahead of the looming end of the current package of measures on Friday. On Saturday, Treasury Secretary Steven Mnuchin said the White House supported an extension to unemployment benefits at a reduced level until year-end.
Gold has the unprecedented US$2,000 an ounce level in its sights after a record close on Friday. Gold for August delivery settled $7.50 or 0.4 per cent ahead at US$1,897.50 an ounce after trading as high as US$1,904.60. The precious metal’s weekly gain of 4.8 per cent was its best since early April. The first target for goldbugs is the all-time intraday high of US$1,923.70 that has stood since September 6, 2011.
The immediate outlook for other miners may not be as rosy following setbacks for iron ore and base metals on Friday. The spot price for iron ore landed in China slid $1.65 or 1.5 per cent to US$109.55 a dry ton. Benchmark copper on the London Metal Exchange slid 2.1 per cent to US$6,430.25 a tonne. Aluminium eased 0.1 per cent, nickel 0.3 per cent, lead 0.4 per cent, zinc 1 per cent and tin 0.9 per cent. Those falls helped drag BHP’s US-listed stock down 0.19 per cent and its UK-listed stock 1.84 per cent. Rio Tinto edged up 0.15 per cent in the US after falling 1.42 per cent in the UK.
Oil inched higher as upbeat European economic data offset a rise in coronavirus cases and the growing cold war between the US and China. Brent crude settled three cents or 0.1 per cent ahead at US$43.34 a barrel.
The dollar began the week on the back foot, falling 0.28 per cent to 70.83 US cents.