ASX futures were 12 points or 0.2 per cent higher at 7020 at 7:00 am on Wednesday, suggesting a gain at the open.
US stock indexes closed mostly higher Tuesday as investors assessed better-than-expected earnings from big retailers showing that consumers are still spending despite persistently high inflation.
The S&P 500 gained 8.06 points, or 0.2%, to 4305.20 after dipping at the open. The technology-heavy Nasdaq Composite dropped 25.50 points, or 0.2%, to 13102.55. The Dow Jones Industrial Average rose 239.57 points, or 0.7%, to 34152.01.
The stock market has also been roaring lately, with the S&P 500 rising for four consecutive weeks as of last Friday. Some investors saw in the rally signs that negative sentiment was loosening. Others think the momentum may be waning, pointing to disappointing recent data on both the Chinese economy and US manufacturing.
“For every time we’re seeing a dip, the buyers are coming to the table, and I think that’s largely a function of the fact that way too many managers were way underweight equities for what is happening and now they’re chasing momentum,” said Derek Amey, partner & co-chief investment officer at StrategicPoint Investment Advisors.
Commodities down
Brent crude oil dropped 2.7 per cent to $US92.49 a barrel, gold was 0.24% lower at US$1,775.38.
Local yields
Australian 2 Year government bonds yielded 2.69% and 10 Years 3.22%. Abroad, the yield on 2 Year US Treasury notes charged the interest of 3.26% and the yield on the 10 Year US Treasury notes was 2.8%.
The Australian dollar whipsawed between 70.19 US cents, unchanged on the previous close of 70.20. The Wall Street Journal Dollar Index, which measures the U.S. currency against 16 others, declined to 98.02.
Asia
Chinese shares closed higher as worries about the deluge of weak economic data out on Monday abated slightly. The benchmark Shanghai Composite Index finished 0.1% higher at 3277.88, the Shenzhen Composite Index ended up 0.4% at 2227.04 and the ChiNext Price Index climbed 0.5% to 2731.39. Infrastructure-related sectors may attract attention after New Development and Reform Commission officials said China kept increasing the economic demand and speeded up its infrastructure construction in 3Q to ensure the country fulfilled the job of achieving the annual economic development targets. The move advantaged China Railway Construction by 0.4% and lifted Shanghai Construction Group by 0.4%.
Logging the biggest loss in the region, Hong Kong’s Hang Seng Index lost 1.0% to 19830.52 as a tech selloff overshadowed a rebound of property stocks. Meituan tumbled 9.1% after a Reuters report that Tencent Holdings will sell most or all of its stake in the company. Tencent was up 0.9 percent and Alibaba Group was down 2.0 percent. Weimob fell 15 per cent after widening its 1H loss and posting poor revenue. Chinese property stocks gained after state-run China Bond Insurance Co. was ordered to offer guarantees for onshore bond issuance of some private developers. Longfor rose 12 percent and Country Garden added 9.1 percent.
Shares in tech gained, though losses in shipping and energy stocks pushed the Nikkei Stock Average 0.1% lower to 28868.91. Mitsui O.S.K. Lines lost 4.1 percent and Idemitsu Kosan was 2.1 percent lower. Nippon Paint Holdings, another company that is exposed to the Chinese property sector, climbed 6.7%, as Chinese real-estate developers soared in a pronounced rebound. The broader market index Topix slipped 0.2 percent, to 1981.96. Investors continue to watch developments between Taiwan, the war and Ukraine and what each means for global trade. Against the yen, the dollar was at 133.37, versus 133.32 late Monday in New York. The yield on the 10-year Japanese government bond declined 2.0 basis points to 0.165 percent.
Europe
European markets rose, lifted by mining stocks after the sector reported stronger than expected results. The pan-European Stoxx Europe 600 rose 0.2 percent, London’s FTSE 100 was up 0.4 percent, the French CAC 40 was 0.3 percent higher, and the German DAX was up 0.7 percent.
Brent crude oil falls 2.7% to 92.57 a barrel. The Dow rises 0.7%. “European markets have continued to edge higher, with the DAX and the FTSE 100 both pushing out to fresh two-month highs,” wrote Michael Hewson, analyst at CMC Markets.
Decent performance from the mining stocks - including some chunky gains from Rio Tinto, Glencore and Anglo American - has helped the UK index as well. The break in sentiment was due to a blockbuster set of [annual] numbers out of Australian miner BHP, which said it anticipated a big pick up in Chinese demand.
North America
Investors may be coming to the conclusion that their gloomier view of recent weeks was overdone, he said, adding that year-over-year inflation decelerated in July and has “hopefully has peaked.”
Mr. Amey said his firm continues to be overweight in industrials and health care, and a bit underweight technology and discretionary sectors.
Investors have been cheered by earnings reports from some of the nation’s largest retailers early this week as they assess how surging prices are influencing consumer spending. Walmart and Home Depot reported on Tuesday, and the likes of Target and others are scheduled later in the week.
“It’s going to be about inventory levels, margins and pricing power and if consumers are still spending on discretionary, or if all their wages are going to food and energy,” said Esty Dwek, chief investment officer at FlowBank.
Walmart stock rose $6.77, or 5.1 percent, to $139.37 after the big-box retailer reported earnings that exceeded estimates. The company also lifted its outlook for the fiscal year, weeks after it had warned that it would fall short of forecasts. Its chief executive said the company had been able to trim expenses in its supply chains.
Home Depot rose $12.77, or 4.1 percent, to $327.38 after the retailer reported record quarterly sales and profit that exceeded Wall Street’s expectations but also said the number of customer transactions dropped. Target and Lowe’s are due to report earnings on Wednesday.
“I think there is some evidence that the consumer is beginning to ask the question, how can I spend less money, and buy some of these lower-cost house brands vs. some of the name brands,” said Jon Maier, chief investment officer at Global X ETFs.
The most recent data revealed that housing starts in the United States fell in July from a month earlier and were weaker than economists had expected.
Josh Jamner, an investment strategy analyst at ClearBridge, said he thought the new housing data could fan further recessionary fears.
“The cake is not cooked,” Mr. Jamner said. “There’s a clear path and opportunity for the Fed to steer us to a soft landing. This is one more piece of data saying "O.K., let's just step slightly away from that soft landing."
