Australian shares are set to fall following scarce gains for Wall Street blue chips as investors looked to small caps to help fan a recovery.

The Australian SPI 200 futures contract was down 24 points, or 0.4 per cent, at 6,593 points at 8.30am Sydney time on Wednesday, suggesting a negative start to trading.

The benchmark S&P 500 closed barely higher on Tuesday while shares in smaller companies soared as investors favoured more economically sensitive market segments as they bet on a recovery in 2021.

The Dow Jones Industrial Average rose 60 points, or 0.19 per cent, to 31,068.69, the S&P 500 gained 1.58 points, or 0.04 per cent, to 3,801.19 and the Nasdaq Composite added 36.00 points, or 0.28 per cent, to 13,072.43.

Locally, major Chinese government-backed investments in Australia face an informal ban after Treasurer Josh Frydenberg acted on national security concerns to reject a $300 million takeover of building contractor Probuild by China's largest construction company, the AFR reports.

The S&P/ASX200 benchmark index closed lower 18.1 points, or 0.27 per cent, to 6,679.1 on Tuesday.

The index was at a session high of 6,733.5, about half a per cent higher, at about midday but slipped.

The All Ordinaries closed down 20.4 points, or 0.29 per cent, at 6,939.1. The financial sector was best, higher by 0.73 per cent. Telecommunications was up 0.19 per cent.

Gold was up 0.2 per cent to $US1,847.42 an ounce; Oil was up 1.4 per cent to $US56.44 a barrel; Iron ore was up 0.3 per cent to $US172.67 a tonne.

Meanwhile, the Australian dollar was buying 77.52 US cents at 8.30am, up from 77.04 US cents at Tuesday's close.


China stocks rebounded on Tuesday from their worst session in three weeks a day earlier, underpinned by gains in the consumer and aerospace sectors, while Hong Kong shares inched higher to hover near a one-year peak hit in the previous session.

The Shanghai Composite index was up 2.18 per cent at 3,608.34, while China’s blue-chip CSI300 index was up 2.85 per cent

Hong Kong shares closed at a near one-year high on Tuesday, underpinned by continued capital inflows from the mainland.

The Hang Seng index ended 368.53 points or 1.32 per cent higher at 28,276.75, the highest level since Jan. 22, 2020. The Hang Seng China Enterprises index rose 1.43 per cent to 11,217.69.

Japan’s benchmark Nikkei share average inched up to close at a fresh three-decade high on Tuesday, as drug makers led the charge on a report that Chugai Pharmaceutical’s drug was effective in treating covid-19 patients.

The Nikkei index ended 0.09 per cent higher at 28,164.34 after recovering from early declines, while the broader Topix index edged up 0.16 per cent to 1,857.94. 


European stocks closed flat on Tuesday, with economically sensitive sectors including banks, automakers and oil supporting markets across the continent.

The regional STOXX 600 index closed up 0.05 per cent after a mixed session, while Germany’s DAX rose 0.1 per cent, France’s CAC inched 0.2 per cent lower and Britain’s FTSE 100 fell 0.7 per cent.

Investors are awaiting the start of the US earnings season this week as well as clarity on fiscal spending plans under incoming US President Joe Biden, who takes office on 20 January.

In Europe, automakers jumped 1.7 per cent to lead gains after Renault, BMW and VW reported 2020 sales.

Their US carmaking rivals also got a boost after General Motors announced its entry into the growing electric delivery vehicle business.

Other cyclicals such as banks, travel and leisure and oil and gas extended last week’s rally on hopes that a larger US stimulus under the incoming Biden administration will spur faster economic recovery.

Oil majors BP and Royal Dutch Shell gained close to 2 per cent as crude prices hit an 11-month high on tighter supply and expectations for a drop in US inventories.

Still, losses in defensive sectors such as healthcare, utilities and consumer staples checked gains in most markets.

“Investors are still wondering where the next big catalyst for further upside will come from, and are painfully aware that the covid-19 crisis remains untamed despite the introduction of vaccination programmes,” Chris Beauchamp, chief market analyst at IG wrote in a client note.

Britain’s exporter-heavy FTSE 100 underperformed other European markets, hit by a stronger pound and a surge in new covid-19 cases.

Companies listed on Europe’s STOXX 600 are expected to report a 26.3 per cent drop in fourth-quarter earnings, data from Refinitiv I/B/E/S shows, as restrictions to control soaring coronavirus cases slowed an economic recovery.

That comes ahead of a clear improvement predicted for the first two quarters of 2021, when earnings are set to rise 40.4 per cent and 75.1 per cent respectively.

Maersk rose 3.4 per cent after brokerage Berenberg upgraded the Danish shipping company’s shares to “buy”, saying earnings momentum driven by freight prices could see it run higher.

Swiss online pharmacy chain Zur Rose hit a record high, surging almost 15 per cent to the top of STOXX 600, after BofA Global Research started coverage with a “buy” rating.

North America

The benchmark S&P 500 closed barely higher on Tuesday while shares in smaller companies soared as investors favored more economically sensitive market segments as they bet on a recovery in 2021.

US Treasury yields climbed and the small cap Russell 2000 outperformed throughout the session as did so-called cyclical sectors such as financials and energy, which are heavily dependent on a strong economy for growth.

Traders were betting that incoming US President Joe Biden, a Democrat, would usher in heftier fiscal stimulus and that a ramp up in distribution of coronavirus vaccines would boost the economy, according Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

“The financials and cyclicals have been the stars to start the year,” said James. ”With the Biden victory comes stimulus expectations.”

Some investors said they were cautious ahead of earnings season while others monitored developments in Washington after supporters of outgoing US President Donald Trump stormed the Capitol last week.

As Democrats moved to impeach Trump for inciting the deadly rampage last week, Trump on Tuesday denied wrongdoing saying that his public comments on the day of the attack were “totally appropriate.”

Also, the Washington Post reported that an FBI office in Virginia issued an internal warning the day before the Capitol invasion that extremists were planning to come to Washington and were talking of “war.”

Trump’s denial and the FBI story, which contradicts suggestions that the administration did not expect an attack, “highlight the fact that there’s still a lot of issues in this country and we have a lot of progress to make before we can really go forward,” said Michael O’Rourke, chief market strategist at JonesTrading in Stamford, Connecticut.

The Dow Jones Industrial Average rose 60 points, or 0.19 per cent, to 31,068.69, the S&P 500 gained 1.58 points, or 0.04 per cent, to 3,801.19 and the Nasdaq Composite added 36.00 points, or 0.28 per cent, to 13,072.43.

Throughout the day the communications services sector was the biggest percentage decliner among the S&P 500’s 11 major industry indexes.

O’Rourke said investors worried that big social media companies such as Twitter Inc and Facebook Inc could come under increased regulatory scrutiny in Congress as the Capitol attacks highlighted their influence after they had to ban Trump from their platforms.

But James at Wedbush argued that sectors that investors were rotating out of technology stocks to fund other purchases.

“The stars of 2020, the tech stocks have been languishing, as people have been using the tech stocks mostly as a source of funds and rotating into cyclicals, healthcare and financials,” James said.

Of the major sectors, energy stocks were leading gains throughout the session as crude prices rose.

The consumer discretionary sector saw some of its biggest single stock boosts coming from carmakers.

Shares in US automaker General Motors Co hit their highest in a decade after chief executive Officer Mary Barra outlined plans for its first electric commercial vans to be delivered to FedEx Corp by year-end.

Also shares of Tesla Inc jumped as investors bet on a big expansion for the electric-car maker after a regulatory filing showed it registered a company in India.

The S&P financial sector traded above its February peak for the first time on Tuesday, boosted by rate-sensitive banks as benchmark US Treasury yields reached their highest levels since March.

Investors were also waiting for the fourth-quarter earnings season to start Friday, with results from JPMorgan, Citigroup and other big banks.