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A fourth day of gains and a new 12-week high appear within reach after Wall Street was boosted by better-than-expected economic data.  

Index futures point to an opening gain of 73 points or 1.2 per cent, bringing the S&P/ASX 200 tantalisingly close to regaining the 6000 level for the first time since early March. The benchmark index climbed 107 points or 1.8 per cent yesterday to 5942 as investors shrugged off evidence the economy is in recession.

Data yesterday showed gross domestic product (GDP) declined 0.3 per cent in the first three months of the year as lockdown restrictions began to brake the economy. Stock investors anecdotally price equities six months ahead and appear to have discounted the present recession as a blip in the long economic boom since the days of Hawke and Keating. The S&P/ASX 200 has regained more than half of its losses since the pandemic low on March 23.

A broad rally lifted Wall Street overnight after economic data suggested the damage to the US economy from COVID-19 lockdowns was not as bad as feared. The S&P 500 climbed 42 points or 1.36 per cent. The index’s four-day winning run is the longest since February. The Dow rose 527 points or 2.05 per cent. The Nasdaq added 75 points or 0.78 per cent.

Payrolls data showed the private sector shed 2.76 million jobs last month, less than a third of the 8.7 million losses economists expected after a 20.2 million plunge in April. A separate report showed activity in the services sector contracted less than expected. The Institute of Supply Management’s non-manufacturing index rose to 45.4 in May from an 11-year-low of 41.8 in April. Economists polled by Reuters had predicted a May reading of around 44.  

“We’re seeing a risk-on trade again today,” Ryan Nauman, market strategist at Informa Financial Intelligence in the US, told CNBC. “A lot of it has to do with the data. The market thinks the worst is behind us and the economy is going to turn around.”

Industrials, financials and energy stocks led the advance as the major indices continued to narrow the gap on their old highs. While tech stocks lagged, the Nasdaq moved within 1.6 per cent of its all-time peak. The broader S&P 500 finished about 8.1 per cent shy of a record. By contrast, the S&P/ASX 200 yesterday closed 20.5 per cent below its February high.

A rotation out of “stay-at-home” stocks continued. While the major airlines all gained at least 5.9 per cent, Netflix dropped 1.8 per cent and Amazon 0.1 per cent. Planemaker Boeing was the Dow’s best performer, jumping 13 per cent.

Market sentiment was boosted by a quieter night on American streets after President Donald Trump threatened to bring in the military to quell violent protests against the death of an unarmed black man. While protests continued, they were mostly peaceful and led to a smaller number of arrests.

BHP and Rio Tinto reached post-pandemic highs in Australian trade yesterday and extended that momentum in overseas action. BHP’s US-listed stock rose 1.43 per cent and its UK-listed stock 1.35 per cent. Rio Tinto added 1.4 per cent in the US and 1.71 per cent in the UK. The spot price for iron ore landed in China dipped 95 cents or 0.9 per cent to US$100.80 a dry ton.

Oil notched a three-month high, but gains were limited by uncertainty whether a conference call of major producers will go ahead tonight or next week. Brent crude settled 22 cents or 0.6 per cent ahead at US$39.79 a barrel.

Gold slid to a three-week low as the stock market rally sucked capital from havens. Gold for August delivery settled $29.20 or 1.7 per cent lower at US$1,704.80 an ounce.

Copper reached its highest level in almost three months before closing barely changed. Benchmark copper on the London Metal Exchange eased 0.1 per cent to US$5,499.25 a tonne. Aluminium gained 1.4 per cent, nickel 0.1 per cent and lead and zinc 0.2 per cent. Tin was unchanged.

The dollar edged up 0.1 per cent this morning per cent to 69.25 US cents.

The start-of-month flood of economic data continues this morning with trade and retail sales figures at 11.30 am EST.

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