Australian shares are expected to edge higher at Tuesday’s open, following a strong lead from Wall Street where technology stocks rebounded late in the session and helped equities push toward their best quarter in six years.
S&P/ASX 200 futures were up 3 points, or 0.03%, to 8,825, suggesting a muted but positive start for the local market.
Investors will also be watching today’s release of the Reserve Bank of Australia’s June policy meeting minutes, along with May private sector credit figures, for fresh clues on the path for interest rates.
ASX rallies as tech and healthcare lead
The Australian share market advanced on Monday as investors returned to growth stocks and looked through ongoing geopolitical uncertainty in the Middle East.
The S&P/ASX 200 Index closed 59.2 points higher, or 0.7%, at 8,823.4, with eight of the 11 sectors finishing in positive territory on the second-last trading day of the financial year.
Trading volumes were expected to lift as institutional investors rebalanced portfolios and crystallised capital gains and losses before year-end.
The local tech sector rebounded almost 4%, led by Xero, which rose 4.5% to $72.18, WiseTech Global, up 7.2% to $33.82, and Life360, which surged 11.6% to $26.27, extending its one-month gain to 35%.
Healthcare also found support. Telix Pharmaceuticals rallied 5.5% to $16.17, while 4DMedical jumped 10.3% to $4.59. Neuren Pharmaceuticals rocketed 36.1% to $16.60 after announcing its Rett syndrome drug Daybue had moved closer to European approval, following a marketing authorisation recommendation from regulators.
The major banks were firmer, with National Australia Bank up 1% to $37.89 and Commonwealth Bank also gaining 1% to $163.61. Judo Capital rebounded 3.4% to 91 cents after last week’s sharp sell-off.
In resources, Fortescue added 2.4% to $19.52 and BHP edged 1.4% higher to $59.82, despite weakness in copper and iron ore prices.
Defensive utilities lagged ahead of the final trading day of the financial year. APA Group (ASX:APA) dropped 5.2% to $10.21 as investors moved to lock in gains after a 25% return this fiscal year, while AGL slipped 1.1% to $8.33.
Middle East risks remain in focus
Monday’s local rebound followed an Axios report that the US and Iran had agreed to halt strikes and meet this week in Qatar to resume talks over the Strait of Hormuz and other issues after fresh hostilities over the weekend.
Oil steadied around US$71.90 a barrel after an early bounce in Asian trade faded, while the Australian dollar dipped to US68.94 cents, taking its monthly losses to about 4%.
“As long as the US and Iran remain in this awkward ceasefire dance, with both sides trading symbolic blows but stopping short of imposing a genuine blockade on Hormuz, the broader risk market can keep looking through the smoke,” SPI Asset Management managing partner Stephen Innes said.
“And as long as Brent stays contained, Hormuz remains open and the ceasefire continues to wobble without breaking, that may be enough for the flow machine to keep pushing equities higher into July.”
Wall Street climbs as tech buyers return
US share markets gained on Monday as recent hostilities between the US and Iran eased and investors moved back into technology shares.
The Dow Jones Industrial Average rose 0.6%, the S&P 500 gained 1.2% and the Nasdaq Composite advanced 2.1%.
Six of the 11 major S&P 500 sectors finished higher, with communication services leading the gains, up 3.1%. The information technology index added 1.7%, snapping a five-session losing streak.
“The bounce we’re seeing is a welcome development for the bulls,” Matt Maley at Miller Tabak told Bloomberg. “We continue to believe strongly that the action in the tech sector will continue to be the main driver in the stock market.”
Maley said tech did not need to keep significantly outperforming, but needed to avoid a major decline because of its heavy weighting in the S&P 500. Otherwise, retail investors could begin rotating toward cash, particularly after repeated warnings about market bubbles.
Tesla was among the strongest performers, rising 8.5% after US safety regulators closed a probe into power steering loss in several models. SpaceX gained 7.1% after Nasdaq said the newly listed company would be added to the Nasdaq 100 index on July 7.
Rocket Lab surged 15.9%, while Western Digital, Palo Alto Networks, Lam Research and Seagate Technology also advanced. Google parent Alphabet rose 5% on its first day as a Dow component.
Comcast gained 4.5% after the media and cable company said it planned to separate into two independent publicly traded companies through a tax-free spin-off of NBCUniversal and Sky.
On the downside, Martin Marietta Materials fell almost 7% after announcing a US$13.5 billion merger with limestone supplier Lhoist North America.
European markets steady
European share markets closed little changed as gains in technology stocks were offset by weakness in construction and telecommunications names.
The continent-wide FTSEurofirst 300 index ended 0.1% higher, while the UK’s FTSE 100 slipped 0.2%.
Telecom stocks were among the biggest laggards after reports that SpaceX and Charter Communications had held talks about a consumer mobile phone partnership. Deutsche Telekom fell 5.4%.
Heidelberg Materials dropped 9.4%, dragging construction-related stocks lower after brokers cut second-quarter revenue estimates.
Investors continued to assess whether the US-Iran ceasefire would hold after the latest round of hostilities.
Currencies and bonds
US government bond yields were steady after the US Supreme Court ruled that Federal Reserve Governor Lisa Cook could remain in her role for now, reinforcing the central bank’s independence from the White House.
The US 10-year Treasury yield was flat at 4.37%, while the US 2-year Treasury yield rose 1 basis point to 4.10%.
Currencies were mixed against the US dollar, which held near 13-month highs against major peers.
- The euro rose 0.4% to US$1.1426.
- The Japanese yen eased 0.1% to 161.93 per US dollar.
- The Australian dollar dipped 0.1% to US68.90 cents.
Commodities mixed as oil rises and gold falls
Global oil prices gained as weekend attacks by the US and Iran highlighted the fragility of the interim peace deal, although hopes that energy shipping through the Strait of Hormuz would continue limited the advance.
- Brent crude futures settled 1.6% higher at US$73.15 a barrel.
Base metals weakened as traders awaited fresh peace talks between the US and Iran and assessed the outlook for US monetary policy, with the Federal Reserve maintaining a hawkish stance on inflation.
- Copper futures declined 0.8%, while aluminium futures dropped 1.6%.
- Gold futures also fell, with fresh US-Iran tensions lifting oil prices and stoking inflation concerns, which in turn supported expectations that interest rates could remain higher for longer. Gold settled 1.4% lower at US$4,039 an ounce.
- Iron ore futures were broadly steady, down 0.1% at US$100.26 a tonne.
Looking ahead
In Australia, the focus will be on the RBA’s June meeting minutes, when the central bank kept rates on hold, as well as May private sector credit figures.
In the US, investors will be watching Conference Board consumer confidence and JOLTS job openings data for further signals on the health of the economy and the likely direction of Federal Reserve policy.