The last full week of trade before the holiday season looks set for a muted start following a mixed session on Wall Street.
Futures trading indicates the S&P/ASX 200 will open little changed. SPI200 futures dipped a point or less than 0.1 per cent as most US stocks ended lower. Iron ore touched a nine-year high.
However, the outlook for the day may have improved over the weekend. The US began rolling out Pfizer’s Covid-19 vaccine after regulators approved the treatment for emergency use late on Friday. A post-Brexit trade deal between the UK and European Union remained alive after the two sides agreed to continue talks beyond this morning’s deadline.
US stocks logged their first weekly declines in three weeks as negotiations for a new relief package dragged. The S&P 500 fell five points or 0.13 per cent on Friday to a third straight loss. The index lost 1 per cent over the week.
The Nasdaq Composite shed 28 points or 0.23 per cent on the day and 0.7 per cent for the week. A 13.6 per cent surge in Disney helped lift the Dow Jones Industrial Average 47 points or 0.16 per cent on Friday, but the index eased 0.6 per cent across the week.
“Optimism surrounding a near-term fiscal stimulus deal is fading despite reports of a bipartisan deal, as the sides can agree on the size of a deal, but not the details,” Mark Hackett, chief of investment research at Nationwide, told CNBC.
Investors have lost patience after months of negotiations on Capitol Hill without tangible progress. House Speaker Nancy Pelosi last week suggested talks could drag on through Christmas.
Millions of Americans stand to lose benefits early next year unless a deal is struck. First-time claims for unemployment benefits jumped last week to their highest level in almost three months as renewed lockdowns threw people out of work. New York City announced on Friday it will suspend indoor dining from today to slow the spread of the virus.
The S&P/ASX 200 enters the last full trading week of 2020 on a six-week winning run. Momentum faded last week as Wall Street stumbled and the dollar hit a 30-month peak. The index ended the week with two straight losses, trimming its five-day gain to a skinny 8.5 points or 0.1 per cent.
Vaccine news will continue to sway the market this week. US regulatory approval late Friday of Pfizer’s vaccine may hand our market a brighter start than futures trading suggests. However, the easy gains from vaccine news have likely passed. CSL weighed on trade here on Friday after scrapping its experimental vaccine with the University of Queensland. The previous week, a production downgrade at Pfizer negatively impacted global market sentiment.
Trading volumes will start to dwindle from this week as institutional trading desks wind down for the festive season. Volumes in the US on Friday were almost 15 per cent below the recent average.
Iron ore futures traded in China soared almost 10 per cent to an all-time high on Friday. Futures traded on the Dalian Commodity Exchange reached US$152.95 per ton after a tropical cyclone forced the closure of ports in the Pilbara. The spot price for ore landed in China (the usual benchmark quoted in these market reports) rose a more modest $2.45 or 1.5 per cent to US$160.70 a tonne, a nine-year high. Normal port service resumed in the Pilbara on Saturday after the storm moved inland.
This week’s only potential market-moving domestic economic report comes on Thursday. The jobs report is expected to show roughly 40,000 Australians found work last month. The official unemployment rate is expected to hold steady at 7 per cent.
China releases a slew of data in the first half of the week, including: foreign investments (today); and industrial production, retail sales, investments and employment (tomorrow). The US Federal Reserve meets this week and reports on Wednesday night. Also that night: retail sales and manufacturing data. Reports on manufacturing and unemployment claims are due on Thursday. The latest bank stress test results are due on Friday.
On the company front, ANZ holds its AGM on Wednesday. Elders and MMA Offshore follow on Thursday, and NAB, Nufarm and Incitec Pivot on Friday. Euro Manganese reports earnings today.
The dollar started a new week in the ascent, rising 0.1 per cent this morning to 75.33 US cents.
The US energy sector fell 1.2 per cent as oil pared a weekly gain. Brent crude settled 28 cents or 0.6 per cent lower on Friday at US$49.97 a barrel. The international benchmark gained 1.5 per cent for the week, briefly closing above US$50 for the first time since March.
Gold eked out a gain for the week as stalled talks on stimulus and Brexit kept interest in havens alive. Gold for February delivery settled $6.20 or 0.3 per cent higher on Friday at US$1,843.60 an ounce for a weekly gain of 0.2 per cent. The NYSE Arca Gold Bugs Index eased 1 per cent.
Copper and other industrial metals retreated from multi-year peaks. Benchmark copper on the London Metal Exchange fell 1.3 per cent to US$7,754.95 a tonne. Aluminium fell 2 per cent, nickel 0.8 per cent, lead 1.2 per cent, zinc 2.7 per cent and tin 0.2 per cent.
“So much good news has already been priced into the market. Profit-taking after such a strong rally is not surprising and we also have risk-off sentiment today in the equities market,” analyst Carsten Menke at Julius Baer, told Reuters.
BHP and Rio Tinto traded mixed in overseas action following two weeks of strong gains. BHP’s US-listed stock ended 0.36 per cent lower. Its UK-listed stock gained 0.58 per cent. Rio Tinto added 0.19 per cent in the US and 0.38 per cent in the UK.