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Aussie stocks were poised to open higher after upbeat economic data and a plunge in oil helped Wall Street reverse two days of falls.
The S&P 500 closed at its strongest level since June, sharpening hopes a new bull market is underway.
Oil slumped to a six-month low, easing inflation worries. Iron ore and most metals declined. The dollar bounced almost 1 per cent.
ASX futures climbed 32 points or 0.47 per cent. An open of that scale would lift the ASX 200 back above 7000. The Australian benchmark has not closed in the sevens since June 9.
Wall Street
US stocks rebounded from two days of weakness as economic data soothed recession fears and earnings season delivered more winners than losers. Energy prices retreated after US stockpiles unexpectedly increased and the Organization of the Petroleum Exporting Countries agreed to increase supply.
The S&P 500 rallied 64 points or 1.56 per cent. The Dow Jones Industrial Average gained 416 points or 1.29 per cent. The Nasdaq Composite advanced 319 points or 2.59 per cent.
The S&P 500 has bounced around 13 per cent off its June low. At the height of this year’s bear market, the US benchmark was more than 23 per cent off its January high. That deficit has been cut to 13.4 per cent.
Consumer stocks led after data showed services-sector activity rebounded last month. The ISM non-manufacturing purchasing managers’ index improved to 56.7 from 55.3 in June. Economists surveyed by Dow Jones expected a fourth-straight decline to 54. The index measures business conditions in retailers, hotels and restaurants.
“The July ISM reports suggest that the overall economy is still holding up well,” senior U.S. economist Michael Pearce at Capital Economics said.
The prices-paid sub-index, an important measure of inflation, fell 7.8 points to 73.9, the lowest reading since February. A separate report on factory orders also surprised to the upside, rising 2 per cent in June.
Federal Reserve official James Bullard said he did not believe the US economy was in recession despite two quarters of negative growth.
“We’re not in a recession right now,” he told CNBC. “With all the job growth in the first half of the year, it’s hard to say there’s a recession. With a flat unemployment rate at 3.6%, it’s hard to say there’s a recession,” he added.
PayPal and Moderna steered the Nasdaq higher following trading updates. Trading platform Robinhood bounced 11.7 per cent after announcing plans to cut almost a quarter of its workforce.
A collapse in crude oil prices to levels last seen in February helped soothe concerns about inflation. Brent crude settled US$3.76 or 3.7 per cent lower at US$96.78 a barrel. The US benchmark slid US$3.76 or 4 per cent to US$90.66.
The declines came after the OPEC+ cartel agreed to a slender increase in monthly production of 100,000 barrels. The US Energy Information Administration said US crude supplies increased by 4.5 million barrels last week at a time when national stockpiles were expected to fall.
Australian outlook
The market recovery looks likely to get back on track this session after yesterday’s wobble.
Promisingly for investors, there was plenty of interest in buying yesterday’s dip. The S&P/ASX 200 finished just 22 points lower after earlier falling as much as 80 points in the first hour. Tuesday’s session also featured a 53-point intraday reversal.
These are important signals in light of how little interest there was in buying weakness just a few short weeks ago. Buying interest has improved significantly.
The index looks likely to open at or slightly above the psychologically-significant 7000 level. The big question today is whether this market has enough momentum to cruise through to higher levels or traders fade the open.
The challenge is made harder by minimal support from the heavily-weighted resource sectors. US energy plunged 2.97 per cent, unsurprising in view of last night’s six-month low in crude. Basic materials were broadly flat, closing 0.13 per cent ahead.
The strength in the US overnight lay in Big Tech (all three sectors gained at least 2 per cent) and financials, up 1.49 per cent. Industrials added almost 2 per cent, healthcare 0.92 per cent and utilities 0.68 per cent.
The domestic reporting season continues today with full-year earnings from Centuria Industrial REIT. Afterpay’s parent company Block reports tonight in the US.
Trade figures are due at 11.30 am AEST.
The dollar built on yesterday’s rebound from below 69 US cents, rising 0.87 per cent to 69.51 US cents.
Commodities
Iron ore declined as weak Chinese housing data exacerbated worries about demand for steel. A survey showed new home prices and sales deteriorated last month.
“The recovery will be slow and gradual, with two major uncertainties ahead: the impact of recent mortgage boycotts on homebuyers’ confidence (and) revival of more lockdowns,” JPMorgan analysts said.
The spot price for ore landed in China retreated US$4.36 or 3.8 per cent to US$110.38 a tonne. The most-traded ore contract on the Dalian Commodity Exchange fell 0.8 per cent to US$116.44.
Industrial metals struggled amid fears rising tensions between China and the US will impact the global economy. Prices deteriorated even as US House Speaker Nancy Pelosi left Taiwan without incident.
“There’s quite a lot of worry about Pelosi’s visit to Taiwan. The hopes were that after Biden took office the U.S.-China relationship would improve and now it seems to be hitting a new low,” Naeem Aslam, chief market analyst at AvaTrade, said.
Benchmark copper on the London Metal Exchange dropped 1.8 per cent to US$7,671.75 a tonne. Aluminium lost 1.7 per cent, nickel 0.7 per cent, lead 1.3 per cent and zinc 0.7 per cent. Tin inched up 0.1 per cent.
BHP‘s US-traded depositary receipts rallied 0.43 per cent. In the UK, the miner added 0.67 per cent. Rio Tinto eased 0.2 per cent in the US and 0.04 per cent in the UK.
Gold‘s longest winning run since April ended with its biggest drop in three weeks. Gold for December delivery settled US$13.30 or 0.7 per cent lower at US$1,776.40 an ounce. The NYSE Arca Gold Bugs Index fell 1.99 per cent.
