The ASX is set for a modest gain on Tuesday, with futures pointing up 9.6 points (+0.11%) at 9:15 am AEST as investors return from the King's Birthday holiday weekend.
Local traders are digesting several days of offshore developments, including a sharp sell-off on Wall Street last Friday, a rebound in technology stocks overnight and fresh tensions in the Middle East that continue to influence energy markets.
Tech stocks find their footing
US markets delivered a mixed session overnight, helping stabilise sentiment after Friday's sharp sell-off.
The Nasdaq climbed 0.86%, the S&P 500 added 0.30% and the Dow Jones slipped 0.16%. Smaller companies also recovered ground, with the Russell 2000 rising 0.77%. The rebound was led by semiconductor stocks, which recovered some of the heavy losses suffered after inflation and interest-rate concerns rattled markets last week.
Micron jumped almost 10%, while chipmakers broadly found support after investors returned to AI-related names that had been among the hardest hit in Friday's pullback.
Even so, the recovery was uneven. The S&P 500 spent much of the session well above its closing level before surrendering most of its gains late in the day, suggesting investors remain cautious after last week's abrupt shift in expectations for US interest rates.
Attention is increasingly turning to US inflation data due later this week, which could provide the next major test for markets after the surprisingly strong jobs report prompted traders to scale back expectations for rate cuts.
Markets watch fragile Middle East truce
Geopolitical tensions remained in focus, although the tone was noticeably calmer than over the weekend.
Israel and Iran both signalled a pause in direct attacks after exchanging fire for the first time since April's ceasefire agreement. While neither side appears ready to declare the dispute resolved, the halt in strikes helped ease some immediate concerns about disruption to energy supplies.
Oil prices remained elevated but pulled back from their highs after briefly hit US$98 a barrel during Monday's trading.
The prospect of a prolonged period of higher energy costs continues to complicate the inflation outlook, particularly as central banks assess whether recent price pressures are temporary or becoming more entrenched.
Commodities and currencies
Commodity markets delivered a mixed performance.
- Copper rose 0.7%, recovering some ground after Friday's heavy sell-off.
- Gold was little changed after falling sharply at the end of last week.
- Oil remained elevated, with Brent crude holding above US$94 a barrel and WTI climbing 0.9% to above US$91/bbl.
- Iron ore slipped below US$102 a tonne as concerns around Chinese demand persisted.
The Australian dollar steadied near US70.4 cents after suffering its largest one-day decline of the year following Friday's US payrolls report.
ASX returns after long weekend
Australian investors are effectively returning to a market that has absorbed several days of offshore developments while local trading was paused.
The ASX 200 fell 0.7% on Friday before the long weekend, dragged lower by weakness across miners, banks and energy stocks as commodity prices softened and global interest-rate expectations shifted higher.
Healthcare provided one of the few bright spots, while technology stocks managed a modest gain despite the broader risk-off mood.
The Small Ordinaries fell 0.4%, reflecting the pressure on resources and emerging growth companies.
Investors will also be digesting the latest ASX index rebalance, which includes additions such as FireFly Metals Ltd (ASX:FFM, TSX:FFM, OTC:MNXMF), Electro Optic Systems and Minerals 260, with the changes due to take effect later this month.
What's on the radar today
The local economic calendar is relatively quiet, with NAB business conditions and Westpac consumer sentiment among the key domestic releases.
Globally, attention will remain focused on developments in the Middle East and the outlook for inflation ahead of Thursday night's US CPI report.
Markets are also watching a growing pipeline of major equity raisings and IPOs, including SpaceX's much-anticipated listing, as investors assess whether demand for AI and technology-related assets can continue absorbing a wave of new supply.
For local investors, attention is likely to remain split between the rebound in technology stocks and the outlook for commodities, with both sectors facing an important test after last week's volatility.