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Australian shares are primed to open near an 11-month high after Wall Street rallied on bets for bigger stimulus measures.

ASX futures climbed 12 points or 0.2 per cent, positioning the market to open within a few points of a pandemic-rebound peak. The S&P/ASX 200 surged 80 points or 1.2 per cent yesterday to finish just 15 points short of its best close since last February.

Overnight, oil and gold rallied. Iron ore declined. The dollar was this morning hovering just below 77 US cents.

Wall Street

The major US indices rebounded after Treasury Secretary nominee Janet Yellen called on the federal government to “act big” to help the economy recover from the pandemic. Companies reporting earnings continued to beat analyst expectations.

The S&P 500 climbed 31 points or 0.81 per cent as trade resumed following the Martin Luther King Jr public holiday. The rally reversed around half of last week’s 1.5 per cent slump.

The Dow Jones Industrial Average climbed 116 points or 0.38 per cent. The Nasdaq Composite gained 199 points or 1.53 per cent as most of the tech giants rallied.

“The key driver is really the additional stimulus coming our way,” Jeffrey Carbone, managing partner at Cornerstone Wealth, told Reuters. “With Janet Yellen saying we need more, so the market is anticipating additional stimulus coming out of Washington.”

Appearing before a congressional committee, former Federal Reserve Chair Yellen backed President-elect Joe Biden’s US$1.9 trillion stimulus proposal announced last week.

“Neither the president-elect, nor I, propose this relief package without an appreciation for the country’s debt burden. But right now, with interest rates at historic lows, the smartest thing we can do is act big,” Yellen said. “I believe the benefits will far outweigh the costs.”

Biden is due to be sworn into office tonight in a heavily-fortified Washington DC. Protests by Trump supporters around the country have so far been limited after states ramped up security around capital buildings.

The new corporate reporting season is off to the best start on record, according to Bank of America data. Roughly 88 per cent of companies have beaten earnings estimates. Despite that, the big names faced profit-taking. Dow component Goldman Sachs sank 2.3 per cent despite topping profit and revenue estimates. Bank of America dipped 0.8 per cent.

Australian outlook

The local market took a big leap yesterday and looks likely to open this morning right up against technical resistance. A decisive break through 6760 would open the gate to a move higher after almost two months of sideways action.

How the day plays out will depend to some extent on this morning’s half-year report from mining heavyweight BHP. The Big Australian is due to release its bi-annual operational review at 8.30 am AEDT. With shares near record levels, the result would need to be pretty special to trigger a fresh up-leg.

Energy stocks outperformed in the US again overnight, rising 2.1 per cent. Other highlights included technology +1.3 per cent, health +0.8 per cent, financials +0.4 per cent and materials +0.4 per cent. Bond proxies declined as the yield on ten-year US bonds improved.  

On the domestic economic front, consumer sentiment figures are due at 10.30 am. The quarterly reporting season is in full swing. Australian Pharmaceuticals Industries holds its AGM today.

The dollar continues to bat around the 77 US cent level. The Aussie was this morning ahead 0.13 per cent at 76.95 US cents.

Commodities

BHP had a mixed night ahead of this morning’s update. Its US-listed stock rose 1.16 per cent after its UK-listed stock eased 0.24 per cent. Similarly, Rio Tinto climbed 1.39 per cent in the US and fell 0.95 per cent in the UK. The spot price for iron ore landed in China declined $3.35 or 1.9 per cent to US$170.25 a tonne.

Oil rose on the demand implications of greater stimulus, and a fall in the US dollar. Brent crude settled $1.15 or 2.1 per cent higher at US$55.90 a barrel.

Gold extended a rebound from last week’s seven-week closing low. Gold for February delivery settled $10.30 or 0.6 per cent ahead at US$1,840.20 an ounce. The NYSE Arca Gold Bugs Index edged up 0.7 per cent.

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