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Stocks look set to bolt out of the starting gate on Melbourne Cup Day after the Dow Jones Industrial Average joined other major Wall Street indices at record levels.
ASX SPI200 index futures rose 41 points or 0.6 per cent to 6698 ahead of a Reserve Bank board meeting and the “race that stops a nation”.
The blue-chip stocks of the Dow have lagged the broader S&P 500 and tech-focused Nasdaq, but caught up last night as Wall Street trotted higher on trade hopes, a rate cut last week and Friday’s unexpectedly strong jobs figures. The Dow advanced 115 points or 0.42 per cent to its first record close since July. The S&P 500 added 11 points or 0.37 per cent and the Nasdaq 47 points or 0.56 per cent.
The White House continued to mend strained relations with China as negotiators work towards a ‘phase one’ trade deal. Commerce Secretary Wilbur Ross said US companies will get licences to sell to Chinese tech giant Huawei “very shortly”. US restrictions on doing business with Huawei have been a major sticking point in trade talks.
Strong US jobs data on Friday dispelled fears that the economy was sliding towards recession, two days after the Federal Reserve cut rates for the third time this year. The US economy added 128,000 jobs, well above expectations. Lacklustre tallies for the previous two months were revised significantly upwards.
The rally in global stocks broadened overnight, with Europe’s benchmark closing at a four-year peak. The pan-European Stoxx 600 rose one per cent to its highest point since April 2015.
The Reserve Bank board meets today and is due to release a policy statement and any change to the cash rate at 2.30pm Eastern Standard Time. The central bank is widely expected to leave the cash rate unchanged at 0.75 per cent following three cuts in five months. Interbank cash rate futures monitored by the ASX place the odds on a cut today at just 7 per cent following solid jobs growth last month.
The ASX 200 battled headwinds from falling banks stocks yesterday and faces additional pressure today from a drop in the price of iron ore. The benchmark index closed 18 points or 0.3 per cent ahead after weak economic data and a profit miss from Westpac took the shine off a rally in mining stocks.
The spot price for iron ore landed at Tianjin sank $2.30 or 2.7 per cent to $US82.70 a dry ton. However, the big two Australian miners were well supported on overseas exchanges amid optimism over the prospects for a trade deal. BHP’s US-listed stock gained 1.88 per cent and its UK-listed stock added 2.95 per cent. Rio Tinto put on 2.41 per cent in the US and 3.02 per cent in the UK.
Oil marked a five-week high as the long-awaited public float of Saudi Arabian processing facility Aramco boosted sentiment. Brent crude settled 44 cents or 0.7 per cent ahead at $US62.13 a barrel, the highest level since late September. On Sunday, Aramco formally announced plans to float shares in what some have dubbed “the world’s most profitable company”.
Gold was well supported as a hedge against uneven US economic data and the possibility trade talks might once again flounder. Gold for December delivery settled 30 cents or less than 0.1 per cent weaker at $US1,511.10 an ounce.
Friday’s unexpectedly strong Chinese factory data helped lift copper and other industrial metals. Benchmark copper on the London Metal Exchange advanced 0.5 per cent. Aluminium rose 1.6 per cent to a five-week peak. Nickel added 2.4 per cent and zinc 0.8 per cent. Lead was flat. Tin was bid down 0.6 per cent.
The dollar declined almost half a cent to 68.82 US cents.
Aside from an RBA rates call and the Melbourne Cup, the 24 hours ahead brings measures of domestic, Chinese and US services activity. Trading volumes here will be affected by the public holiday in Victoria. The US quarterly corporate earnings season continues tonight and is nearing the home straight with more than 75 per cent of S&P 500 companies having reported.
