The Australian share market is poised to open lower, influenced by a sharp decline in oil and iron ore prices and a mixed performance on Wall Street.
ASX futures indicate a modest 0.1% drop, suggesting a virtually flat start to the trading day.
Declining US manufacturing
The Australian dollar reached 66.9 US cents, its highest level in two weeks, following weak economic data from the US showing a second consecutive month of declining manufacturing activity.
This has spurred speculation that the Federal Reserve might cut interest rates this year, although some investors remain sceptical due to inflation rates remaining above the Fed's 2% target.
On Wall Street, the S&P 500 and Nasdaq experienced modest gains of 0.1% and 0.6% respectively, while the Dow Jones Industrial Average fell by 0.3%.
“It was a mixed session for US equity markets, with the S&P500 and the Nasdaq making cautious gains while the Dow Jones fell by 115 points despite a significant move lower in US yields after soft economic data,” wrote IG analyst Tony Sycamore.
“US yields fell 7-12bp across the curve after the ISM manufacturing PMI declined by 0.5 points to 48.5 in May versus 49.5 expected. Within the sub-indices, there was a sharp fall in New Orders and a rebound in employment.
“The rebound in employment offers a possible clue ahead of tonight's JOLTS Job Openings and Friday night's crucial Non-Farm Payrolls release. The chance of a 25bp Fed rate cut in September increased marginally to 54%.
“In stock news, Nvidia's share price surged 4.9% after it unveiled its next-gen AI chips. Meme stock GameStop's surge price leapt 21% as Keith Gill, aka ‘Roaring Kitty’, revealed a $116 million bet in a Reddit (NYSE:RDDT) post.”
European stocks rise
Meanwhile, the pan-European STOXX 600 index rose by 0.3%, with investors anticipating a 25-basis-point rate cut by the European Central Bank on Thursday, potentially lowering rates to 3.75%.
Market participants are also betting on an 80% likelihood that the Bank of Canada will reduce rates at its meeting on Wednesday.
Gold prices have continued their upward trend, rising by 1% overnight to reach US$2,351 per ounce. This marks the fourth consecutive month of gains for the precious metal.
Conversely, oil prices plummeted to a near four-month low following a complex decision by the OPEC+ cartel, which could result in increased supply later this year despite sluggish demand growth.
Brent crude futures fell by 3.4% to US$78.36 per barrel, closing below US$80 for the first time since February 7.
On Sunday, OPEC+ agreed to extend most of its oil output cuts into 2025 but left room for voluntary cuts from eight members to be gradually unwound from October onward.
Iron ore prices also suffered, falling by 4.2% to US$110.65 per tonne, the weakest level in six weeks.
This decline is driven by concerns over Chinese demand, impacted by the country's prolonged property crisis.
Now in its third year, China’s housing slump continues to affect the world's second-largest economy and its financially strained property developers.
What’s happening with small caps?
The Small Ordinaries closed at 3,024 yesterday, up 0.04% on the previous day.
You can read all the small cap news on Proactive throughout the day:
- Antipa Minerals Ltd (ASX:AZY) has announced additional results from 2024 Phase 1 drilling at its 100%-owned Minyari Dome Gold-Copper Project in the Paterson Province of Western Australia.
- Globe Metals & Mining Ltd (ASX:GBE) has entered into an At-the-Market Equity Facility (ATM Facility) with New York-based financier, Long State Investments Limited.
- Astral Resources NL (ASX:AAR) has reported assay results from a recently completed 18-hole drilling program at the Kamperman Prospect, part of its 100%-owned Feysville Gold Project, south of Kalgoorlie in Western Australia.
- Nexus Minerals Ltd (ASX:NXM) has delivered the scoping study for open-pit mining and third-party toll treatment of the Crusader-Templar gold deposit,130 kilometres northeast of Kalgoorlie.
- Novo Resources Corp (TSX:NVO, OTCQX:NSRPF, ASX:NVO) has fielded significant assays from a six-hole diamond drilling program completed at the Belltopper Gold Project in Victoria.