The Australian sharemarket is expected to open slightly higher on Wednesday, with futures pointing to a gain of 12 points, or 0.1%, at the open.
The positive lead follows a softer session on Tuesday, when the ASX lost 0.5% as investors weighed global growth concerns, central bank commentary and ongoing volatility across technology and commodity markets.
The Australian dollar was trading at US69.20 cents at 5.15am AEST, holding firmer as currency markets remained mixed against the US dollar.
Locally, investors will be watching May building approvals data for further insight into the housing pipeline and broader economic momentum.
Wall Street lifted by AI rebound
US sharemarkets rose on Tuesday to close June with their strongest gains in years, as artificial intelligence-related stocks bounced and helped ease some of the pressure that has weighed on Wall Street this month.
The S&P 500 and Nasdaq Composite recorded their best quarter in six years, while the Dow Jones Industrial Average posted its strongest quarterly gain since 2022.
The Dow finished up 0.3%, the S&P 500 advanced 0.8% and the Nasdaq added 1.5%.
AI stocks have been the key swing factor for US markets in recent weeks. After surging during the AI investment boom, the sector has come under pressure amid concerns valuations had run too far and that heavy spending may not translate quickly enough into productivity gains and profits.
Nvidia rose 2.6% on Tuesday, trimming its loss for the month and becoming one of the biggest contributors to the S&P 500’s gain. Microsoft, another major AI investor, added 1.2%, reducing its monthly decline to less than 18%. Oracle, however, slipped 0.8%, taking its June fall to 35%.
Technology was the standout sector, rising 2.6%, led by a 3.9% gain in semiconductors. KLA, Sandisk and AMD were among the strongest performers, rising 8.4%, 10.9% and 7.7% respectively.
Real estate was the weakest sector, falling 2.2%, dragged lower by a 5.8% decline in Digital Realty after the data centre REIT priced a secondary share sale. Concentrix dropped 11.2% after quarterly profit and revenue came in just below analysts’ expectations, while Morgan Stanley (NYSE:MS) dipped 1.3% after a broker downgrade of major Wall Street investment banks.
US economic data remained mixed. Job openings rose by 9,000 to 7.59 million in May, the highest level in two years and a sign the labour market remains resilient. Consumer confidence, however, improved by less than expected, with more Americans saying jobs were becoming harder to find.
US government bond yields rose after the labour market data, with the 10-year Treasury yield up 8 basis points to 4.46% and the two-year yield up 5 basis points to 4.16%.
Investors are now looking ahead to ADP non-farm payrolls, the ISM Manufacturing PMI and remarks from Federal Reserve figure Kevin Warsh at a high-profile economic conference in Portugal.
European markets hit quarterly highs
European sharemarkets also gained, reaching intraday highs and recording their biggest quarterly rise in more than five years.
The rally was supported by optimism around artificial intelligence infrastructure and signs of easing tensions in the Middle East.
Technology stocks led the move, rising 2.5% on Tuesday and recording their strongest quarterly gain since October 2001. Chip equipment maker ASML climbed 6.8%, while STMicroelectronics (NYSE:STM) added 1.4% and Infineon rose 4.4%.
Siemens Energy gained 5.6% after reiterating strong demand trends during a quarterly earnings call, while French drugmaker Abivax surged more than 38% after reporting positive topline results from an inflammatory bowel disease drug study.
The continent-wide FTSEurofirst 300 index ended 0.9% higher, while the UK’s FTSE 100 edged up 0.1%.
Elsewhere, Germany’s DAX rose 1.5%, South Korea’s Kospi gained 1% and Japan’s Nikkei 225 added 0.9% as the yen weakened near its lowest level against the US dollar in four decades.
In Europe, investors will be watching the flash estimate for June consumer price inflation.
Currencies mixed as Aussie firms
Currency markets were mixed against the US dollar.
- The euro was steady at US$1.1423.
- The Japanese yen fell 0.4% to ¥162.59 as yield differentials continued to pressure the currency.
- The Australian dollar rose 0.5% to US69.21 cents, holding around US69.20 cents in early Australian trade.
The yen remains under scrutiny as US government bond yields continue to sit well above Japanese yields, fuelling speculation that Japanese authorities may intervene to support the currency.
Oil slips as traders watch US-Iran talks
Oil prices fell on Tuesday and finished with their biggest monthly and quarterly losses since the early stages of the COVID-19 pandemic in 2020.
Brent crude futures settled 0.3% lower at US$72.92 a barrel, while earlier reports also showed the international benchmark easing around 1.1% to US$73.12.
Investors are watching potential US-Iran talks in Doha, where US envoys have arrived for discussions with mediators about implementing an initial deal to end the conflict in Iran. The US officials are not expected to negotiate directly with Iranian diplomats.
Markets are hoping any easing in tensions will support full access to the Strait of Hormuz, a key global energy shipping route, allowing oil tankers to move more freely and helping keep crude prices contained.
Metals higher, gold flat and iron ore eases
Base metals moved higher on Tuesday, supported by stronger factory data from China, the world’s largest metals consumer.
- Copper futures rose 1.6%, while aluminium futures climbed 1.2% as brokers forecast ongoing supply deficits.
- Gold futures were steady, settling flat at US$4,039 an ounce, but still closed with their sharpest quarterly decline in 13 years.
- Iron ore futures slipped 0.1% to US$100.20 a tonne.
Looking ahead
In Australia, May building approvals will be released.
In the US, investors will focus on ADP non-farm payrolls, the ISM Manufacturing PMI and comments from Kevin Warsh in Portugal.
In Europe, the key release will be the flash estimate for June inflation.