ASX 200: How is the market expected to unfold today?

Summary

  • Today, the ASX 200 is set to open higher, likely to be supported by gains in energy and mining shares.
  • The yield of the benchmark 10-year US Treasury had risen above 1.50% on Friday.
  • On Friday, crude oil prices rose for a fifth consecutive week, reaching their highest since October 2018.

Starting the week on a positive note, the ASX 200 is set to open higher today, likely to be supported by gains in energy and mining shares on the back of strong commodities prices. On Friday, the Australian benchmark index had rebounded from lower levels and closed the session 0.45% higher, at 7,308.

Last week ended on a strong note for Wall Street too as it registered a market-wide rally, with the S&P 500 closing at a record high, being 2.7% up on a weekly basis. Weaker-than-expected inflation data coupled with the news of US President Joe Biden successfully securing a bipartisan infrastructure agreement underpinned the rally in equities. Joe Biden’s infrastructure plan is valued at around US$1.2 trillion over the period of eight years, of which US$579 billion is new spending.

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The Dow Jones surged 0.71% to close at 34,438.58 points, while the S&P 500 was up 0.34%. However, the NASDAQ Composite was slightly negative with a downtick of 0.06%, to 14,360.39 after making a new high in the session before.

Read More: Pfizer, Moderna COVID-19 vaccines under the lens as FDA adds heart inflammation warning

The latest US personal consumption expenditures or PCE data revealed that a measure of underlying inflation rose less than expected in May 2021. Core PCE surged 3.4% on a YoY basis, comfortably beating the Fed's flexible target of 2%.

The benchmark 10-year US Treasury yield had risen above 1.50% on Friday to close out a week with largest weekly gains since March 2021. The yield curve steepened slightly, with the spread between 5-year and 30-year Treasury yields increasing to 123.80 basis points from 118.60 the day before.

The spread between 10-year and 30-year Treasury yields also had its largest weekly gain since August 2020.

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The US dollar ended Friday’s session almost unchanged, recovering from an early fall after tamer-than-expected producer price inflation data was out. Investors continued to evaluate whether the US Fed will act sooner to curb inflation if it persists. The dollar index closed unchanged at 91.838 after falling to 91.524.

On Friday, the Australian and New Zealand dollars were up for a fifth straight session and recorded solid weekly gains. The Australian dollar traded 0.1% up, at US$0.7594, after hitting a near six-month low of US$0.7478 earlier this month.

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In the cryptocurrency market, Bitcoin ticked up 1.5%, to US$32,275 on Sunday, recovering from the low of ~US$30,175 made on Saturday. Other peers such as Dogecoin and Ether were down 0.4% and 0.3%, respectively.

Read More: Is Paraguay ready to legalize Bitcoin as a legal tender? Don’t get your hopes up just yet!

Technology shares

On Friday, the technology shares witnessed minor selling pressure from the all-time high made on Thursday. Shares such as Xero Limited (ASX:XRO), Afterpay Limited (ASX:APT) and Zip Co Limited (ASX:Z1P) should be on investors’ radar.

Crude oil climbed higher     

On Friday, crude oil prices rose for a fifth consecutive week, reaching their highest since October 2018, on expectations that demand growth will outstrip supply and after OPEC+ decided to be cautious in supplying more crude oil to the market from August 2021.

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Brent crude futures rose 0.8%, to close at US$76.18 per barrel, while US West Texas Intermediate (WTI) crude oil was up 1.0%, to US$74.05.

Australian energy shares such as Santos Limited (ASX:STO), Woodside Petroleum Limited (ASX:WPL) and Origin Energy Limited (ASX:ORG) could trade higher today.

Gold edged higher

On Friday, gold edged higher after stagnant US consumer spending tempered bets for the Fed’s early monetary policy tightening, setting the yellow metal on track for its first weekly gain in the last four weeks.

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Spot gold ticked up 0.1% to US$1,776.96 an ounce by 01:07 AM EDT, gaining about 0.8% for the week. The far month US gold futures were little changed at US$1,782.80 an ounce.

Gold shares such as St Barbara Limited (ASX:SBM), Newcrest Mining Limited (ASX:NCM) and Silver Lake Resources Limited (ASX:SLR) could open with a gap up.

Read More: How to invest in gold stocks in Australia?

Metals update

On Friday, Chinese steel and iron ore futures inched up, while coke and coking coal both were up around 5% up on the back of solid demand at mills and supply tightness.

The most-traded iron ore futures for September delivery on the Dalian Commodity Exchange (DCE) rose to 1,171.5 yuan a tonne, compared to 1,170.5 the day before.

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On Friday, copper prices held their ground after US President Joe Biden embraced a bipartisan Senate infrastructure deal valued at around US$1.2 trillion, helping reinforce expectations of robust demand. The benchmark copper on the London Metal Exchange (LME) was almost unchanged at around US$9,417 per tonne at 1605 GMT. The prices of copper were up around 5% last week.

Local miners such as Rio Tinto Limited (ASX:RIO), Fortescue Metals Group Limited (ASX:FMG) and BHP Group Limited (ASX:BHP) might have a green trading session today.

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