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A strong week for Australian shares was poised to continue after strong employment data and a retreat in oil helped Wall Street advance.
ASX futures rallied 38 points or 0.52 per cent, signalling a positive start following three days of gains. The S&P/ASX 200 edged up nine points or 0.12 per cent yesterday to a nine-week high.
Overnight, oil dropped more than 2 per cent amid European resistance to including energy in fresh sanctions against Russia. Gold settled at a two-week high. Nickel traded ‘limit up’ for a second day.
Wall Street
US stocks rallied as a retreat in oil soothed inflation worries, while the strongest unemployment claims report in more than 50 years highlighted the strength of the economy.
The S&P 500 climbed 64 points or 1.43 per cent. The Dow Jones Industrial Average added 349 points or 1.02 per cent. The Nasdaq Composite firmed 269 points or 1.93 per cent.
Crude oil retreated from a two-week high ahead of a second meeting of Western leaders tonight where US President Joe Biden was expected to press the European Union to reduce its dependence on Russian gas and oil. The European Union was expected to unveil a roadmap to reduce its exposure to Russia, but stop short of a full boycott.
Brent crude settled US$2.57 or 2.1 per cent lower at US$119.03 a barrel. The US benchmark, West Texas Intermediate, declined US$2.59 or 2.3 per cent to US$112.34.
Edward Moya, senior market analyst at OANDA, said NATO was “ratcheting the pressure against Russia right now,” but “they will take time before they have to resort to an oil embargo on Russia”.
Overnight, Western leaders agreed to strengthen NATO’s presence in Eastern Europe, expand sanctions against Russia and increase military and humanitarian aid for Ukraine.
Buyers were encouraged by evidence of the strength of the US labour market. First-time claims for jobless benefits fell to 187,000 last week, the lowest figure since 1969.
“This data is exactly the sort of evidence that has given the Fed confidence that they can raise rates more quickly to battle inflation,” broker Jefferies said.
Winners from a strengthening economy, including tech and mining, led the advance. Chipmakers outperformed. Nvidia gained 9.82 per cent, Intel 6.94 per cent and AMD 5.8 per cent.
Wall Street has been choppy this week, see-sawing between advances and retreats after strong gains last week lifted the Dow and S&P 500 out of correction territory. The S&P 500 is less than 7 per cent from this year’s peak. The Dow is within 6 per cent. The Nasdaq Composite was still down 13 per cent after entering a bear market earlier this month.
Australian outlook
The S&P/ASX 200 looks primed for a crack at 7400 for the first time since mid-January. The domestic market has glided higher since Tuesday as strengthening commodity prices provided a shield against overseas volatility.
Crude took a breather overnight. Iron ore was flat. Gold and nickel rallied, but most industrial metals retreated.
Despite that mixed menu, miners were among Wall Street’s best performers as a 53-year low in jobless claims underlined the strength of the US economy. The US materials sector gained 1.96 per cent. Only tech went better, rising 2.71 per cent. BHP and Rio Tinto both rose in US trade.
The US energy sector turned positive in late trade, inching up 0.13 per cent. All 11 sectors advanced. Financials gained 0.75 per cent.
There is nothing on the domestic economic calendar today to change the overnight narrative.
The dollar continued to strengthen, advancing 0.21 per cent this morning to 75.14 US cents.
Commodities
Nickel traded ‘limit up’ for a second day as prices remained volatile and buying interest thin. A substantial short position held by a Chinese producer has also contributed to volatility that forced the London Metal Exchange to suspend trading earlier this month.
Benchmark nickel on the LME climbed 15 per cent to US$37,235 a tonne. Nickel also traded up to its daily limit in Shanghai, surging 17 per cent to US$36,666.
Aluminium declined 2.27 per cent on the LME, copper 1.23 per cent, lead 2.87 per cent and zinc 3.58 per cent. Tin gained 1.57 per cent.
Gold logged its highest close in two weeks as Federal Reserve officials argued for higher rates to control inflation. Metal for April delivery settled US$24.90 or 1.3 per cent ahead at US$1,962.20 an ounce. The NYSE Arca Gold Bugs Index eased 0.28 per cent.
Iron ore held steady. Buying interest was reportedly subdued by transportation caps in the steel-making province of Tangshan to contain a Covid outbreak. The spot price for ore landed in China edged up nine US cents or 0.1 per cent to US$149.01 a tonne.
BHP‘s US-traded depositary receipts rose 1.81 per cent. The miner’s UK stock added 2.23 per cent. Rio Tinto firmed 0.54 per cent in the US and 0.98 per cent in the UK.
