Join our daily newsletter At The Bell to receive exclusive market insights
The ASX 200 looks set to crack 7200 for the first time since June after optimism about the Christmas shopping season and a rebound in resource stocks boosted Wall Street.
ASX futures rallied 62 points or 0.86 per cent to 7255. The ASX 200 closed at 7181 yesterday. The index has not traded above 7200 since the first week of June.
Overnight, US stocks rallied in thin trade ahead of Thursday’s Thanksgiving holiday. Oil, iron ore and most metals rebounded as the US dollar turned lower. The Australian dollar gained more than half a percentage point.
Wall Street
US stocks rose as upbeat earnings from Best Buy, American Eagle Outfitters and Abercrombie & Fitch helped offset a dour outlook from Dollar Tree. Resource stocks led as commodity prices rebounded from worries earlier in the week about rising Covid cases in China.
The S&P 500 rallied 54 points or 1.36 per cent. The Dow Jones Industrial Average gained 398 points or 1.18 per cent. The Nasdaq Composite added 150 points or 1.36 per cent.
Fears of a grim holiday shopping season for retailers were assuaged by mostly solid earnings and forecasts. Best Buy performed better than expected in the third quarter and raised its full-year earnings outlook. The share price jumped 12.76 per cent.
Clothing retailer Abercrombie & Fitch soared 21.47 per cent on a “cautiously optimistic” outlook. American Eagle Outfitters gained 18.23 per cent as strong demand for work clothes helped revenues hold up better than expected. Discount retailer Dollar Tree struck the only sour note, falling 7.79 per cent after lowering guidance.
“People are hopeful that consumers can still squeeze out a strong holiday season despite the headwinds they’re facing,” Brandon Pizzurro, director of public investments at GuideStone Capital Management, told Reuters.
The dollar and treasury yields retreated after Cleveland Federal Reserve President Loretta Mester said she supported a smaller rate hike next month. The Fed has raised its target rate by 75 basis points at the last four meetings.
“I think we can slow down from the 75 at the next meeting. I don’t have a problem with that, I do think that’s very appropriate,” Mester told CNBC.
The US dollar index dropped more than 0.6 per cent. The yield on ten-year US treasuries declined four points to 3.77 per cent.
Australian outlook
The mood on financial markets has turned bullish as the looming US Thanksgiving break puts investors in a holiday mood. Reports from China have been unrelentingly negative this week, yet financial markets are firmly on the rise.
The S&P/ASX 200 put on almost 0.6 per cent yesterday and has a fresh five-month high in its sights this morning.
Commodity markets rebounded overnight, lifting the US energy sector 3.18 per cent and basic materials 2.23 per cent.
Gold miners were a standout as the yellow metal steadied after four days of losses. The NYSE Arca Gold Bugs Index bounced 4.27 per cent.
All 11 US sectors rallied. Tech and retail stocks performed notably well. Defensive sectors brought up the rear.
The dollar caught an uplift from a dip in the greenback as forex traders reacted to the latest comments from a Fed official. The Aussie climbed 0.6 per cent to 66.47 US cents.
Preliminary measures of manufacturing and services sector activity are due for release at 9 am AEDT. The Reserve Bank of New Zealand holds a monetary policy meeting today.
AGM season rolls on with meetings for shareholders in WiseTech, Abacus Group, Shopping Centres Australasia, Hills, Netwealth, Mesoblast and Integrated Research.
Volpara Health releases half-year results.
Commodities
Commodity prices rebounded as a weaker US dollar made prices more attractive for buyers using other currencies.
“The dollar is soft, yields are lower and that’s supporting the general level of risk appetite in the market,” Ole Hansen, head of commodity strategy at Saxo Bank, said.
Oil continued to recover from a ten-month low on Monday when a disputed report about possible production increases triggered wild swings. Prices recovered after Saudi Arabia’s energy minister denied increased output was under discussion.
Brent crude settled 91 US cents or 1 per cent higher at US$88.36 a barrel. West Texas Intermediate firmed 1.1 per cent to US$80.95.
“The fact that Saudi Arabia has denied that there was any discussion about an increase in oil supply with OPEC and its allies has supported the market today,” Naeem Aslam, chief market analyst at AVATrade, said.
“Going forward, we are expecting oil prices to remain highly volatile, especially ahead of [the OPEC] meeting, which is going to take place next week.”
Iron ore recovered from a wobble on Monday after China announced fresh restrictions in several parts of the country to combat a surge in Covid cases. The most-traded January ore contract advanced almost 2 per cent on the Dalian Commodity Exchange to 725 yuan.
Copper rose for the first time in five sessions. Benchmark copper on the London Metal Exchange rallied 1.46 per cent to US$7,995.50 a tonne. Aluminium gained 2.4 per cent, nickel 3.5 per cent and tin 4.2 per cent. Lead lost 0.9 per cent and zinc 0.77 per cent.
“The market seems to be taking the view that the Chinese outbreak is a temporary one, but one that could last longer than expected, so that’s keeping a lid on any exuberance,” Saxo Bank’s Hansen said.
Gold broke a four-session losing run, closing little changed as traders awaited the minutes from the most recent Fed policy meeting, released tonight. Gold for December delivery settled 30 US cents or 0.02 per cent ahead at US$1,739.90 an ounce.
BHP‘s US-traded depositary receipts rallied 2.65 per cent. The miner’s UK listing gained 1.92 per cent. Rio Tinto rose 1.42 per cent in the US and 2.22 per cent in the UK.
