The end-of-week rebound in Australian stocks looks set to continue after strong US jobs data fuelled Wall Street’s best session in two months.
ASX SPI200 index futures rallied 35 points or 0.5 per cent to 6738, signalling a third day of gains as the local market continues the repair-work following heavy losses through the middle of last week. The ASX 200 lost 2 per cent for the week despite a 0.4 per cent rebound on Friday.
The US-China trade war will remain front and centre this week as a deadline looms without a deal. A round of US tariffs on Chinese imports is scheduled to take effect on December 15 unless the feuding countries sign a long-mooted phase-one deal. That sets the scene for a potentially volatile week as market sentiment swings between optimism and pessimism.
US traders were optimistic heading into the weekend after the best monthly jobs figures in ten months chased away concerns the economy was slowing. The S&P 500 jumped 28 points or 0.91 per cent. The Dow put on 337 points or 1.22 per cent, its biggest rise in two months. The Nasdaq added 86 points or 1 per cent.
The November jobs report smashed expectations. The US economy created 226,000 new jobs last month, the highest number since January. Economists had predicted growth of nearer 180,000. The jobless rate fell from 3.6 per cent to 3.5 per cent, a 50-year low. Wages ticked higher and consumer sentiment moved well above recent averages.
Investors seized on signs of progress in trade talks. China’s Finance Ministry announced it will exempt some US farm produce from tariffs. White House National Economic Council director Larry Kudlow insisted constructive talks were talking place “almost daily” and “we are, in fact, close”.
Weekend trade data underlined the impact of the trade war on China. Exports declined over November for a fourth straight month, however an unexpected rise in imports suggested government attempts to boost consumption were gaining traction.
US banks had their best session in more than a month. Trade-sensitive sectors, including energy and industrials, led the rise. The defensive utilities sector missed the upswing as traders favoured sectors more exposed to global growth.
The big two miners should provide momentum this morning following strong gains overseas. BHP’s UK-listed stock surged 2.54 per cent and its US-listed stock 1.31 per cent. Rio Tinto put on 2.11 per cent in the UK and 1.39 per cent in the US. Spot iron ore edged up 70 cents or 0.8 per cent to $US89.40 a dry ton.
Oil ended its best week since September with further gains after the OPEC oil cartel agreed to slash production to support prices. Brent crude settled $1 or 1.6 per cent ahead at $US64.39 a barrel on Friday for a weekly tally of 6.5 per cent. OPEC – the Organization of the Petroleum Exporting Countries – and its allies agreed to cut production by 500,000 barrels a day from January, deepening existing production caps.
Copper staged its biggest rally in more than two months on strength in the US economy. Benchmark copper advanced 1.7 per cent to $US5,990 a tonne on the London Metal Exchange. Aluminium climbed 1 per cent, nickel 1.5 per cent, tin 1.6 per cent and zinc 0.2 per cent. Lead lost 0.7 per cent.
A soaring US dollar drove precious metals lower. Gold for February delivery fell $18 or 1.2 per cent to $US1,465.10 an ounce as the greenback responded to the dimming outlook for further rate cuts. The US Federal Reserve holds its last meeting of the year this week, but is widely expected to sit on its hands after cutting its key rate three times this year.
Pressure on local dollar from the rising greenback was partly offset by hopes for a trade deal. The Aussie eased just a tenth of a cent to 68.31 US cents.
The week ahead starts slowly, with nothing major on the economic calendar here or overseas until tomorrow. The domestic news flow includes business confidence and housing data tomorrow, and consumer sentiment on Wednesday. The Fed meets in the US, but the spotlight is very much on trade negotiations.