Stocks look set to recoup some of this week’s heavy losses after Wall Street rebounded on reports the US and China could sign a trade deal within ten days.
Australian index futures rallied 56 points or 0.8 per cent to 6667, promising relief after a brutal sell-off stripped 256 points or 3.7 per cent from the benchmark index in two sessions.
Global markets cratered this week after the White House opened several new fronts in its trading wars and downplayed the likelihood that the US and China will agree terms this year. US stocks bounced overnight as the elusive trade deal swam once again within reach.
The S&P 500 jumped 25 points or 0.63 per cent after Bloomberg reported US negotiators expect to sign off on a ‘phase one’ interim deal before a round of US tariff hikes scheduled for December 15. The report, which quoted unnamed sources close to the negotiations, said talks had not stalled or been derailed by US support for Hong Kong protesters. Negotiators were working on the fine detail of which tariffs to roll back and how China would honour commitments to buy US farm produce. Separately, US President Donald Trump said talks were going well.
The response on Wall Street continued an entrenched pattern of slavish obeisance to the latest trade headlines.
“It’s like we’ve all become Pavlov’s dog,” Neil Dwane, global strategist at Allianz Global Investors, told CNBC. “Every time someone says ‘trade deal’, we go up or we go down.”
The Dow put on 147 points or 0.53 per cent, reversing half of Tuesday’s fall, the industrial average’s largest in almost two months. The Nasdaq added 46 points or 0.04 per cent.
Trade-sensitive stocks trimmed losses suffered during the US’s three-session losing run. Apple, Caterpillar and computer chip-makers all rallied.
Trade optimism eclipsed a generally downbeat round of economic data. The private sector added just 67,000 new workers last month, less than half the number economists expected. A separate report showed growth in services activity slowed more than expected, but an increase in new orders hinted at strengthening demand in the months ahead.
The ASX 200 finished yesterday at an eight-week low following an 106-point or 1.63 per cent tumble. The pace of the decline since Thursday’s record close has been staggering as the market reeled from a surge in the dollar and the prospect of weak commodity demand if the trade war drags on.
Today should bring relief for investors in BHP and Rio Tinto, which snapped back in overnight action. BHP’s US-listed stock rose 1.24 per cent and its UK-listed stock 0.87 per cent. Rio Tinto gained 0.51 per cent in the US and 0.12 per cent in the UK. Both stocks lost more than 2 per cent in Australian trade yesterday. Iron ore advanced in Chinese trade. The spot price for ore landed at Tianjin rose $1 or 1.1 per cent to $89 a dry ton.
Oil staged its biggest rally in six weeks after the first decline in US inventories in a month and a half. Brent crude rose $2.18 or 3.6 per cent to $63 a barrel. Energy markets have risen in anticipation that tonight’s OPEC meeting will extend production caps aimed at supporting prices.
Copper reversed Tuesday’s loss during a mixed session for industrial metals. Benchmark copper rebounded 1.2 per cent on the London Metal Exchange, recouping Tuesday’s 1.1 per cent decline. Lead gained 1.2 per cent and zinc 2 per cent. Aluminium declined 0.5 per cent and nickel 1.9 per cent. Tin was unchanged.
Gold eased back from its highest level in almost a month as traders responded to the latest trade headlines. Gold for February delivery declined $4.20 or 0.3 per cent to $US1,480.20 an ounce.
The dollar edged up another tenth of a cent to 68.52 US cents.
No let-up in this week’s heavy flow of domestic economic news: October retail sales and trade figures are potential market-movers at 11.30am EST. OPEC and its allies gather tonight for a meeting that will have big impact on the outlook for oil prices. Wall Street has trade and factory orders scheduled, but the week’s big-ticket item is the November jobs report tomorrow night.