Trader Joseph Lawler, right, works on the floor of the New York Stock Exchange.
Australian shares are poised to edge higher, in line with gains on Wall Street. April’s jobs data is pending. ASX futures were up 11 points at 7.15am AEST. The Australian dollar was 0.6 per cent higher.
NAB looks for the jobs data to reveal a strong 25K gain in employment and a slight fall in the unemployment rate to 5.4 per cent from 5.5 per cent.
“Wages growth has bottomed around 2 per cent y/y, but there’s no suggestion of any up-tick as yet,” NAB said.
“Any increase was probably unlikely, given unemployment and underemployment have been relatively stable in recent times – and are still elevated. This will leave the RBA comfortably on hold and waiting for some further reduction in unemployment, which the bank expects to occur, but only gradually. The encouraging news is that leading indicators such as the NAB Business Survey and SEEK job ads suggest the demand for labour is strengthening.”
The yield on the US 10-year Treasury was up 2 basis points to 3.10 per cent in late New York trade, according to Bloomberg pricing.
Macquarie analysts declared that a generation of investors will experience for the first time the “end of the great bond bull market”, reports John Kehoe from Washington.
Local data: Labour force April – employment change, unemployment rate, participation rate; NZ PPI outputs first quarter
Overseas data: Euro zone construction output March, Current account March; US Philly Fed May, Leading index April
SPI futures up 11 points or 0.2% to 6110 at about 7.15am AEST
AUD +0.6% to 75.16 US cents
On Wall St: Dow +0.3%, S&P 500 +0.4%, Nasdaq +0.6%
In New York, BHP +1.6% Rio +2.5%
In Europe: Stoxx 50 flat, FTSE +0.2%, CAC +0.3%, DAX +0.2%
Spot gold +0.2% to $US1293.58 an ounce at 2.03pm New York
Brent crude +0.5% to $US78.82 a barrel
US oil -0.2% to $US71.14 a barrel
Iron ore +1.1% to $US68.03 a tonne
Dalian iron ore -0.3% to 483 yuan
LME aluminium -0.4% to $US2316 a tonne
LME copper +0.2% to $US6826 a tonne
10-year bond yield: US 3.10%, Germany 0.60%, Italy 2.11%, Greece 4.30%, Australia 2.88%
From Today’s Financial Review
InfoTrack goes after PEXA: David Wills, the former investment banker in charge of business development at Rich Lister Christian Beck’s InfoTrack, is set to disrupt the $1b sales process for PEXA.
The stocks exciting Rich Lister Seymour: Kevin Seymour has had a long career in property, yet such is his enthusiasm for the sharemarket that he once even formed his own funds management company.
‘Markets need short sellers’: Super funds: The largest super funds say short sellers are an important part of the market, even if they find themselves on the wrong end of the trade.
Retail and technology stocks led Wall Street higher on Wednesday and the small-cap Russell 2000 hit a record peak, even as a rise in US bond yields to an almost seven-year high suggested more competition for equities and investors fretted over geopolitics.
Smaller companies continued this year’s trend of outperforming their larger rivals with the Russell 2000 reaching a record high. The index ended up 1 per cent.
“Small caps present a cleaner play than large caps on two fundamental market drivers: lower corporate taxes and a stronger US economy,” research firm DataTrek wrote in its morning briefing.
Macy’s Inc shares advanced 10.8 per cent after the department store operator reported results that beat analyst estimates and the company raised its profit outlook.
The results also boosted shares of rival department stores J.C. Penney, Kohl’s, Nordstrom and Target. The S&P 500 Department Store index gained 5.2 per cent, its largest daily jump in nearly six months.
“I think corporate earnings have been remarkably strong,” said David Carter, chief investment officer at Lenox Wealth Advisors in New York. “The concern is really more about the future and decelerating growth.”
Macy’s earnings pushed the consumer discretionary sector higher, a day after government data showing an acceleration of consumer spending fanned inflation concerns and helped send US government bond yields higher.
“The question remains what multiples are people willing to pay for equities in this higher rate environment.”
Of the 11 major sectors of the S&P 500, only rate-sensitive utilities and real estate stocks closed in negative territory.
The tech sector rose 0.4 per cent, and gave the S&P 500 its biggest boost among the major sectors.
Italy’s two anti-system parties’ progress to form a coalition and free up billions of euros for tax cuts and welfare scared off investors and hit the Milan bourse on Wednesday while a weak euro provided support to the broader European market.
The pan-European STOXX 600 index rose 0.2 per cent, hovering around its highest level since early February but Italy’s FTSE MIB fell 2.3 per cent, its worst fall since the election took place in early March.
Italian banks, which are seen as a proxy for political risk in the country due to notably to their government bond holdings, fell 3.9 per cent as borrowing costs jumped.
Italy already has a debt pile worth more than 130 per cent of annual output and the parties’ pledge to introduce a flat tax rate of 15 per cent, new welfare payments and scrap an unpopular pension reform are likely to street the country’s finances.
A weaker euro provided support for dollar-earning European companies as the dollar extended its rally against a basket of currencies on Wednesday and touch a five-month high.
Miners and the broader basic materials sector benefited from the trend and closed 2.8 per cent higher.
Among the other top gainers on the STOXX was Homeserve which surged to 9.3 per cent after UBS upped its recommendation for the stock to “buy”.
Hong Kong stocks barely changed on Wednesday, as renewed worries over North Korea and surging US bond yields dampened sentiment in Asian markets. Investors were awaiting news from a second round of US-China trade talks in Washington this week.
The Hang Seng index ended 0.1 per cent down at 31,110.20, while the China Enterprises Index was unchanged at 12,440.12 points.
The blue-chip CSI300 index fell 0.8 per cent to 3892.84, while the Shanghai Composite Index lost 0.7 per cent to 3169.57 points
Treasury Wine Estates facing China glut: Treasury Wine Estates distributors are sitting on up to three years’ worth of cheap stock, raising doubts about growth targets.
In Tokyo trading, Nisshin Steel Co jumped 16 per cent after Nippon Steel & Sumitomo Metal Corp said in the afternoon that Nisshin will become its wholly owned subsidiary next January via a share exchange.
The Nikkei ended 0.4 per cent lower to 22,717.23.
Data in the morning showing the world’s third-biggest economy suffered a deeper-than-expected contraction in the first-quarter also checked buyers.
Japan’s economy contracted a more than expected 0.6 per cent in the January-March period on an annualised basis, putting an end to eight straight quarters of expansion.
Government debt has to be tamed: Too much government, not too little, is damaging our ability to cope with the next downturn.
John Williams, president of the Federal Reserve Bank of San Francisco, who takes the helm of the central bank’s powerful New York branch on June 18, said he thinks the time is approaching to phase out forward guidance – the nearly decade-old practice of pledging continued easy monetary policy.
The strategy was used to calm investors in the depths of the financial crisis, and the Fed continues to say rates will remain below levels likely to prevail over the longer run, even as it lifts borrowing costs to prevent overheating.
“We can’t keep talking about policy normalisation once we’re around what we think of as a neutral interest rate,” Williams said in Minneapolis, referring to the level of interest rates that neither slows nor speeds up the economy. “So I think this forward guidance, at some point, will be past its shelf life.”
St. Louis Federal Reserve Bank president James Bullard on Wednesday said he believes the Fed’s policy rate is “pretty close” to neutral, and that further rate hikes would act to slow economic growth and push downward on inflation.
“If we start going up from here we are going to get into restrictive territory,” Bullard said in a Bloomberg Television interview. “Do we really want to do that when inflation expectations are already hovering below our target for the next five years?” Most of Bullard’s colleagues believe at least two more rates hikes are appropriate this year, given that unemployment is at 3.9 per cent and inflation is edging up toward the Fed’s 2-per cent target.
Copper ended marginally higher on Wednesday after two losing sessions, with the uplift from encouraging Chinese home sales data capped by a stronger dollar.
Benchmark copper on the London Metal Exchange finished 0.2 per cent up at $US6826 a tonne after falling by more than 1 per cent on Tuesday. Copper, used in power and construction, is down 1.8 per cent this week.
“We have had some decent data from Chinese new home sales, which showed the strongest growth for about six months, and that’s pretty positive,” said ING analyst Oliver Nugent.
“For the most part, the likes of copper are bouncing from the sell-off yesterday, but (it’s) very sideways trading.”
LME aluminium ended 0.4 per cent down at $US2316 a tonne, while lead fell 0.3 per cent to $US2341, zinc added 0.4 per cent to $US3075, tin lost 0.7 per cent to $US20,725 and nickel added 0.4 per cent to $US14,475.
Chinese steel and iron ore futures erased gains on Wednesday following a three-day rally that lifted the raw material to an eight-week high, although the outlook for steel demand remained upbeat.
“It’s still the best season for steel demand in China and it could continue until early July or when summer officially begins. Now a lot of work sites have been busy,” said a Shanghai-based trader.
The most actively traded October rebar on the Shanghai Futures Exchange stood at 3677 yuan ($US577.23) a tonne after a brief loss during early deals on Wednesday. The construction steel product touched 3715 yuan on Tuesday, a 1-1/2-week high.
Australian shares closed higher on Wednesday, driven by modest gains from market heavyweights as shares in a2 Milk and Bellamy’s fell sharply.
The S&P/ASX 200 Index finished the day up 9.2 points, or 0.2 per cent, at 6107, recovering some of Tuesday’s losses.
The a2 Milk Company dragged the market on Wednesday, falling sharply on a trading update.
with Reuters, Bloomberg, AAP
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