ASX 200: Is the market poised to recover on Wednesday?

Summary

  • The ASX 200 is poised for a good start on Wednesday, with a higher opening by 0.35%.
  • On Tuesday, global equity markets edged lower due to the rising cases of coronavirus in Asia.
  • The Australian and New Zealand dollars extended losses on Tuesday after cautious investors cut down on risk amid concerns over rising COVID-19 cases.

On Wednesday, the ASX 200 is poised for a good start, with a higher opening by 0.35%, on the backdrop of a strong overnight session on Wall Street, as gains made in frontline technology shares propelled the S&P 500 and the NASDAQ Composite to record highs.

On Tuesday, global equity markets edged lower due to the rising cases of coronavirus in Asia. Investors also speculated about whether the US Federal Reserve would extend its timetable to end its monetary policy.

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The S&P 500 marked a record high for the fourth consecutive session, supported by technology and banking shares. The rally was also buoyed by a government survey that revealed US consumer confidence in June 2021 hit its highest since the onset of the coronavirus pandemic.

On Wall Street, the Dow Jones was up 0.03%, to 34,292.3, while the S&P 500 also gained 0.03%, to 4,291.81. The NASDAQ Composite added 0.19% and ended the session at 14,528.34.

Fear over the highly contagious Delta variant of coronavirus is becoming a global worry and denting investors’ sentiment, which had already been shaken by the Fed’s hawkish tilt this month.

Read More: ASX Indices Trade On a Cautious Note

Indonesia is witnessing record-high cases, while Malaysia has planned to extend its lockdown. Thailand has announced newer restrictions. In addition, Portugal and Spain are restricting travel for unvaccinated British travellers.

On Friday, investors would be watching the US jobs report for June 2021. According to a poll by Reuters, economists expect the addition of 690,000 jobs this month, up from 559,000 in May 2021.

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The US Treasury yields remained in a range as the market participants waited to see how the US employment data for June 2021, due on Friday, might affect the Fed’s monetary policy stance. The benchmark 10-year yield, which rose as high as 1.51% during Tuesday’s session, was last traded flat at 1.4782%.

On Tuesday, the US dollar rose to a one-week high, registering its largest single day gain in about two weeks, as surging cases of the new Delta variant of coronavirus threatened to derail a global economic recovery. When investors lose confidence in the equity markets, they generally tend to move to the US dollar as a safe haven. In afternoon trading, the dollar index rose 0.2% to 92.077.

The Australian and New Zealand dollars extended losses on Tuesday after cautious investors cut down on risk amid concerns over rising COVID-19 cases, leading to strengthening of the greenback. The Aussie dollar weakened 0.1% to US$0.7557, falling for a second consecutive session. The New Zealand dollar was off 0.1% from its previous closing, to US$0.7032.

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In the cryptocurrency market, Bitcoin has risen to the highest level since 19 June 2021, surging 4.8% to US$36,180. Other popular cryptos such as Dogecoin and Ether were also up 3.5% and 5.3%, respectively.

Read More: What is Floki coin, and why is it trending?

Technology shares to continue uptrend

Technology shares have been rising since the last few sessions. Today, the trend seems to be resuming on the ASX, as the tech-heavy NASDAQ 100 has marked a new all-time high in the US, led by demand for technology shares.

The Australian technology shares such as Xero Limited (ASX:XRO), Afterpay Limited (ASX:APT) and Zip Co Limited (ASX:Z1P) could trade higher today.

Crude oil ticked up

On Tuesday, crude oil prices rose on the back of broad hopes for a demand recovery. The comments from OPEC's secretary general overshadowed travel restrictions due to new COVID-19 outbreaks, also helped fuel the rally.

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Brent crude futures were up 0.4%, at US$75.01 per barrel by 11:49 AM EDT, recovering after a 2% fall on Monday. West Texas Intermediate (WTI) crude futures rose 0.4%, to US$73.19.

Australian energy shares such as Viva Energy Group Limited (ASX:VEA), Origin Energy Limited (ASX:ORG) and Santos Limited (ASX:STO) could show some recovery from their losses on Tuesday.

Gold prices softened

On Tuesday, gold prices fell to their lowest level since mid-April 2021 as the US dollar gained ahead of this week's US jobs report, which is expected to add new jobs and could cement the Fed’s recent hawkish stance.

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Spot gold fell 0.93% to US$1,761.66 an ounce by 01:39 PM EDT, after touching US$1,749.20, its lowest since 15 April 2021. The US gold futures were down 1%, at US$1,763.60 an ounce.

Australian gold miners such as Northern Star Resources Limited (ASX:NST), De Grey Mining Limited (ASX:DEG) and St Barbara Limited (ASX:SBM) could continue their losses from the previous session.

Metals update

On Tuesday, iron ore futures fell, weighed down by steel demand in China reverting to a lower level due to threats of intervention by the Chinese government seeking to put a leash on high prices.

The most active September futures contract for iron ore on China's Dalian Commodity Exchange (DCE) closed 2.7% lower at 1,153 yuan (US$178.57) per tonne, after four straight sessions of gains.

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Copper prices also fell for the fourth consecutive session on Tuesday as surging COVID-19 cases strengthened the US dollar and cast doubt on a speedy recovery of some economies. In addition, the plentiful supply of industrial metal also weighed down on its price.

Three-month copper on the London Metal Exchange (LME) fell 0.3% to US$9,352 a tonne by 1651 GMT after falling as low as US$9,236 earlier in the session.

Local miners such as BHP Group Limited (ASX:BHP), Rio Tinto Limited (ASX:RIO) and Fortescue Metals Group Limited (ASX:FMG) could trade lower today.

Read More: What is coking coal, and where is it used?

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