ASX futures were up 69 points or 1 per cent at 7176 at 8.00 am AEST on Friday, indicating an opening jump.
Overseas, the Dow industrials were up 1.6%, 11% below their peak in January. The S&P 500 advanced 2%. The tech-dominated Nasdaq Composite rose 2.7%, aided by advances in shares of Apple, Microsoft, Amazon.com, and Tesla.
Reports like those from US retailers Macy’s, Dollar General, and Dollar Tree were heartening, helping counter a gloomier picture of retailers painted last week, when results from Walmart, Target, and Kohl’s heightened fears that rising costs were eating into profits.
“Having had such a tough time with retail last week, you’re starting to see some other indicators that not everything in retail is bad,” said Wayne Wicker, chief investment officer for MissionSquare Retirement. “It gives probably a little more confidence that the consumer continues to be reasonably strong.”
The minutes of the Fed meeting released Wednesday showed that policymakers agreed on half-percentage point increases in June and July, a pace that was communicated beforehand. The major stock indexes closed higher after the report.
“Markets have been reassured to some extent that the Fed is not going to be tightening more aggressively than what is expected,” said Luc Filip, head of investments at SYZ Private Banking.
Nearby, the S&P/ASX 200 closed down 0.7% at 7105.9, dragged by heavyweight stocks that had powered the previous session’s rally.
Shares in 12 of the 13 biggest companies by market cap fell on economic concerns following data showing softer than anticipated 1Q business investment.
Coalminers had a horrid day and the new Labor government talked up renewables, with Whitehaven down 4.7%, Coronado 5.6% lower, and New Hope off 7.8% on a quarterly update.
An index of the 20 largest companies fell 0.9% on losses among banks, miners, and consumer staples. BHP, Rio Tinto, and Fortescue dropped 0.9%-3.7%, while Macquarie, NAB, ANZ, and Commonwealth banks dipped 0.3%-0.7%.
Tech stocks pared losses. Appen jumped 29% on a takeover bid from Telus, with Block up 1.2%.
The ASX 200 has slipped 0.6% so far this week.
Brent crude oil jumped 3.1% to US$117.61 a barrel in commodity markets. Iron ore fell 1.6% to US$131.25. Gold was flat at US$1853.90.
The local bond markets kept rallying. Australian 2 Year government bond yields fell to 2.34% while 10 Year fell to 3.20%. US bond markets were mostly unmoved. The US Treasury 2 Year notes fell yield to 2.49% and the forget about 10 Year again at 2.75%. Yields fall as prices rise.
The Australian dollar was at 70.97 US cents at 7.00 am AEST, above the previous close of 70.85 US cents. The Wall Street Journal Dollar Index, which measures the US dollar against 16 other currencies, eased to 94.53.
Asia
China stocks clamped up in mixed response, as the market rebounded from the previous day’s adding for range-bound trading so far this week. Analysts from Central China Securities expect volatility to continue in the short run, but are optimistic about a broad recovery trend from current levels, as China’s renewed wave of the pandemic is gradually brought under control. The benchmark Shanghai Composite Index climbed 0.5% to settle at 3123.11, while the Shenzhen Composite Index also gained 0.5% to land at 1955.13. The tech-heavy ChiNext Price Index was the sole loser, shedding 0.2% to close at 2321.13. Medical services providers and medical equipment manufacturers were among the biggest laggards. The weakness was countered by advances in engineering firms and machinery suppliers.
Hong Kong’s Hang Seng Index remained on a downtrend this week, ending 0.3% lower at 20116.20, as pharma and property stocks dragged. CSPC Pharma fell 5.1% after the company reported a weaker 1Q profit, Wuxi Biologics dropped 5.0% and Alibaba Health lost 2.6%. The worst laggard was Country Garden Services, which fell 5.7%, while Country Garden Holdings lost 2.7%. On the other hand, among gainers, Lenovo Group gained 1.1% after its 4Q profit surged 48%. In the Chinese tech sector, Meituan declined 0.7%, Tencent Holdings added 0.1%, and Alibaba Group advanced 1.5% before its earnings.
Japanese stocks closed lower, pressured by losses in electronics stocks, amid continuing worries about higher operational costs because of supply-chain disruption. Advantest fell 3.6% and Fanuc finished down 2.2%. Mitsubishi Electric by contrast dropped 4.1% after announcing further quality-control issues. The Nikkei Stock Average declined 0.3%, to end at 26604.84.
Europe
European markets were buoyed by strong retail numbers and a positive readthrough for markets from US Federal Reserve minutes released Wednesday. The pan-European Stoxx Europe 600 rose 0.7%, while the French CAC 40 and German DAX were both over 1% higher.
“US stocks are rallying as traders interpreted both the Fed’s minutes as a pledge to only gradually tighten policy to combat inflation and after some retailers offered optimistic outlooks,” Oanda analyst Edward Moya says in a note. “So the Fed has tied itself into a couple of half-point rate hikes into Jackson Hole and taking that risk of excessive near-term tightening out of markets.”
London’s FTSE 100 closed 0.67% higher on Thursday, part of a relief bounce with other global markets albeit with questions to follow about how long it can last.
“Another attempt at a relief rally is underway across equities, with a pretty decent bounce in European and US markets following last night’s Fed minutes,” IG Group PLC chief market analyst Chris Beauchamp says.
Those minutes didn’t provide further clarity on the direction of monetary policy but rather soothed fears that a rapid pace of tightening was forthcoming, Mr. Beauchamp says. But outside of bargain hunting, there is little hard reason for the abrupt turnaround, which is likely to have investors asking whether next week will bring yet another sharp reversal in fortunes, Mr. Beauchamp said.
North America
US stocks climbed Thursday, and the Dow Jones Industrial Average extended its streak of gains to five days in a row, after results from retailers sent a wave of energy through the market.
Encouraging results from Macy’s, Dollar General, and Dollar Tree helped offset a more pessimistic view of retailers last week, when results from Walmart, Target, and Kohl’s fueled fears that soaring costs are eating into profits.
“After you really had a tough time with retail last week, you’re now starting to see some other evidence that not all of retail is doing poorly,” said Wayne Wicker, chief investment officer at MissionSquare Retirement. “It probably gives a little more confidence that the consumer remains reasonably strong.”
The Dow industrials rose 1.6%, down 11% from its January record. The S&P 500 advanced 2%. The technology-focused Nasdaq Composite soared 2.7 percent, aided by gains in shares of Apple, Microsoft, and Amazon.com and Tesla.
It has been an especially turbulent time for equity investors. The latest plunge brought the S&P 500 low enough on Friday that it was headed toward closing at least 20 percent lower than its January high. The benchmark then reversed course so as not to close in bear market territory.
Even with the advances of major indexes this week, many investors think markets will remain unsettled for the foreseeable future.
“I think we’re going to still see some more volatility going forward,” said Leslie Thompson, the chief investment officer at Spectrum Wealth Management.
Investors have been weighing how the Federal Reserve’s plans to tighten monetary policy might stifle economic growth and put pressure on the performance of financial markets.
Minutes of the Federal Reserve meeting showed that policymakers in June and July were in agreement that increases of half a percentage point would be appropriate, consistent with previous communication. Major stock indexes rose after the release.
“Markets have been reassured to a certain extent that the Fed is not going to tighten more aggressively than what is being expected,” said Luc Filip, head of investments at SYZ Private Banking.
New data being released are being scrutinized by money managers as they seek to discern the vitality of the economy. On Thursday, the second reading of US gross domestic product for the first quarter came out worse than the first, contracting at an annualized rate of 1.5%.
“Economic data has surprised on the downside recently. We do see this tightening of economic conditions. How bad the growth slowdown is is what the markets are now thinking,” said Shaniel Ramjee, a multi-asset fund manager at Pictet Asset Management.
Initial jobless claims dropped last week and remained near record lows, painting a mixed picture of the economy.
Individual stocks continued to move on earnings reports. Analysts have been combing through results for signs that inflation has started to take a toll on profits.
“We’re looking ahead to profits and earnings. Many stable companies are coming out with lower guidance,” Mr. Ramjee said. “Even the tech sector is not immune from margin pressure, particularly from input costs like wages.”
Williams-Sonoma shares surged $15.02, or 13 percent, to $130 after the retailer reported profits that topped analysts' forecasts. Macy’s gained $3.71, or 19 percent, to $22.92 after the department-store chain reported strong sales growth and raised its earnings outlook.
Dollar Tree stock gained $29.21, or 22%, to $162.80 and Dollar General stock climbed $26.79, or 14%, to $222.13 after the discount establishments crushed Wall Street earnings targets. That marked the best one-day gain on record for both stocks, according to Dow Jones Market Data.
Nvidia shares gained $8.76, or 5.2%, to $178.51 after the chip maker reported record revenue, even as it offered sales guidance for the current quarter that fell short of Wall Street expectations.
Shares of VMware gained $3.82, or 3.2 percent, to $124.36 after Broadcom confirmed it would acquire the cloud computing firm for $61 billion in cash and stock. Broadcom shares gained $19.03, or 3.6%, to $550.66.
