The morning catch up: ASX to start the day flat as US slips and EU gains

ASX Futures are pointing to a mostly flat start to trading today – up just 2 points. A mixed bag of results from the US and European markets leave the bourse’s trajectory in uncertain territory.

US share markets edged lower as investors awaited Friday's monthly US jobs report and waited for indicators on further interest rate movements.

Initial jobless claims in the US rose to 207,000 last week, slightly better than the anticipated 210,000. Job cuts fell to 47,457 in September from 75,151 in August, significantly better than the estimated 86,000.

The US trade deficit shrunk to US$58.3 billion in August, compared to an expected US$59.8 billion.

US government bond yields softened, with the 10-year Treasury yield falling by 2 points to 4.71% and the 2-year yield dipping by 3 points to 5.02%, although the market didn’t bounce back in response.

San Francisco Fed President Mary Daly hinted that the Federal Reserve might not need to raise interest rates further.

On the green side of the ledger, frozen potato supplier Lamb Weston Holdings surged 8% after raising its annual profit and sales forecasts.

In contrast, Clorox tumbled 5.2% following its first-quarter loss, dragging the S&P 500's consumer staples sector down by 2.1%. Rivian Automotive shares plunged 22.9% on news of a US$1.5 billion convertible green bond sale and in-line quarterly revenue forecasts.

All three indices fell about 0.1%; The Dow slipped 10 points, the Nasdaq 16 and the S&P500 a full 0.1%.

EU markets reversed a 3-day slump overnight, lifted by falling bond yields and robust travel and tourism numbers.

The travel & leisure index recorded its best day in nearly two months, rising 1.5%. Air France KLM shares advanced 3.8%, and British Airways-owner IAG (LON:ICAG) added 2.5%.

Pandora, a jewellery retailer, also soared 12% after lifting growth targets.

Overall, the FTSEurofirst 300 index gained 0.2%, while the UK FTSE 100 index rose 0.5%.

Currency and commodity markets

In both European and US trading sessions, currencies gained strength against the US dollar for the second day in a row.

The Euro climbed from an initial US$1.0499 to session highs close to US$1.0550 at the US market close.

Similarly, the Australian dollar ascended from US63.26 cents to nearly US63.70 cents. The Japanese yen also strengthened, moving from 149.08 yen per US dollar to JPY148.30, and settling near JPY148.45 at the US close.

Base metal prices slid overnight. Copper futures declined by 1%, marking its fourth consecutive session of losses. This decline was attributed to concerns over demand in China as well as global economic uncertainty influenced by interest rates. The aluminium futures price decreased by 0.8%.

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Global oil prices decreased by 2% on Thursday, extending losses from the previous session.

The uncertain demand outlook was enough to dampen prices despite an OPEC+ decision to maintain existing oil output cuts. The Brent crude price slid by US$1.74, or 2%, to US$84.07 a barrel. The US Nymex crude price declined by US$1.91 or 2.3% to settle at US$82.31 a barrel.

Gold followed oil and the base metals down, shedding US$3 an ounce or 0.2% to US$1,831.80 in its ninth consecutive session in the red, driven down by concerns over more US interest rate hikes.

Iron ore was unable to buck the trend as China paused for its Golden Week holiday, falling by US$0.61 or 0.5% to US$117.42 a tonne.

Yields slip alongside oil

Capital.com senior financial market analyst Kyle Rodda explains the relationship between oil, bonds and securities after last night’s market movements.

“What are investors up to? Nothing – just hanging around… and waiting for US jobs data tonight,” Rodda wrote.

“Yields were slightly lower. Stocks pared early losses. The run-up in the US Dollar slowed, probably as traders squared the books a bit before tonight’s release, although its uptrend appears healthy and intact.

“Futures are pointing to a flat to marginally positive open for Asian indices.”

US Dollar Index:

“The drop in yields and subsequent bounce in equities has come thanks to an (almost) inexplicable drop in crude prices,” Rodda explained.

“The oil market certainly had some froth to blow–off. However, the rapidness of the move has wholly reversed the narrative about stubborn price pressures and $100 per barrel oil.

“On little news, it pushed through technical support last night, with support at $80 coming into view.”

Crude Oil:

“Heading into the Non-Farm Payrolls release, coincident data still points to robustness in the US economy,” Rodda emphasised.

“Weekly jobless claims rose slightly last week to 207,000 but were lower than expected and remained at levels indicative of a strong jobs market and arguably accelerating US economy.

“Forecasts imply the official jobs numbers tonight will reveal that the US economy added 177,000 jobs last month, with the jobless rate edging from 3.8% to 3.7%.”

What’s happening in small caps?

The S&P/ASX Small Ordinaries closed up 13.5 points of 0.51% yesterday, having lost 6.03% over the last month.

While it’s been a quiet morning, here’s what’s making news, which you can read more about throughout the day with Proactive:

Read more on Proactive Investors AU

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