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A record night on Wall Street as Joe Biden was sworn in as president has paved the way to a new 11-month high for the ASX.
The Dow, S&P 500 and Nasdaq scaled fresh peaks, supported by strong corporate earnings and optimism about further stimulus measures. Oil, gold and most industrial metals rose. Iron ore declined. The dollar rallied.
Australian futures climbed 44 points or 0.66 per cent to a level last seen in late February last year.
Wall Street
Led by so-called ‘stay at home’ winners, US stocks soared after Netflix reported unexpectedly strong subscriber growth. The Nasdaq Composite – home to the streaming service and the rest of the FAANG group of tech giants – rocketed 260 points or 1.97 per cent.
The S&P 500 put on 53 points or 1.39 per cent. The Dow Jones Industrial Average added 258 points or 0.83 per cent.
Joe Biden was sworn in as the 46th president of the United States, ending the tumultuous reign of Donald Trump. The new era was expected to be ushered in with a raft of policy changes. Biden’s aides told reporters the new president would sign 15 executive actions in his first afternoon in charge. Expectations for action on vaccines and greater stimulus spending have fuelled the latest up-leg on Wall Street.
“I think an orderly transfer of power, coupled with a well-defined plan to give us vaccines as they roll out, will make it so this market can go up tremendously,” CNBC’s Jim Cramer said. “Everything else, I’m not saying it’s irrelevant but you can’t get this economy open until we’ve figured out how to get the vaccines from Pfizer and Moderna into our arms.”
Just 12.3 million Americans have been inoculated, according to CNBC. Biden’s stimulus proposal includes billions of dollars to accelerate distribution after Trump’s Operation Warp Speed missed its target of vaccinating 20 million people by the end of 2020.
Netflix charged 16.9 per cent after smashing subscriber expectations and announcing it will break even for the first time this year. That triggered a rally in other tech heavyweights. Streaming rival Disney climbed 0.8 per cent. Apple gained 3.3 per cent, Amazon 4.6 per cent, Facebook 2.4 per cent and Microsoft 3.7 per cent.
“People are back to looking at technology as a part of the market that can do well whether Covid stays a problem or is eventually pushed to the side,” Rick Meckler, partner at Cherry Lane Investments, told Reuters.
Australian outlook
The door is open for the S&P/ASX 200 to cement yesterday’s breakout session. The benchmark index inched clear of a two-month sideways trading range yesterday and can leave it far below with another strong session today. The index ended yesterday’s session just 5.8 per cent from last February’s all-time closing high.
The tech sector is likely to be in the spotlight following a Nasdaq-led US rally. US tech stocks rose 2 per cent. The US communication services sector, which includes the likes of Disney, Facebook and Netflix, jumped 3.6 per cent. The consumer discretionary sector, which includes Amazon and Tesla, gained 2.3 per cent.
The two sectors that matter most on the ASX were more subdued. The materials sector edged up 0.4 per cent. Financials sank 0.5 per cent amid mixed earnings results. Bond proxies were helped by a decline in US ten-year yields.
How today’s ASX session concludes will be dictated to some extent by the December jobs report at 11.30 am AEDT. The consensus among economists is that the unemployment rate should drop to 6.7 per cent from 6.8 per cent as the jobs market continues to heal. The economy is expected to have added around 50,000 jobs.
The day ahead will also bring a slew of quarterly earning updates. Highlights today include reports from Woodside Petroleum, South32 and Northern Star.
The dollar rose 0.41 per cent to 77.45 US cents.
Commodities
BHP and Rio Tinto shrugged off a second straight decline in iron ore. BHP’s US-listed stock advanced 1.96 per cent and its UK-listed stock 2.77 per cent. Rio Tinto put on 1.31 per cent in the US and 1.98 per cent in the UK. The spot price for iron ore landed in China declined $1.31 or 0.8 per cent to US$168.90 a tonne.
Gold climbed to its strongest level in almost two weeks as the US dollar declined. Gold for February delivery settled $26.30 or 1.4 per cent higher at US$1,866.50 an ounce, its best finish since January 7. The NYSE Arca Gold Bugs Index climbed 3.3 per cent.
Oil firmed for a second session. Brent crude settled 18 cents or 0.3 per cent ahead at US$56.08 a barrel.
“Markets are filled with enthusiasm for a new policy era, and oil markets are no exception,” Bjørnar Tonhaugen, head of oil markets at Rystad Energy, wrote. “The Biden administration is not only seen as the beginning of more political stability in the US, but also as the catalyst for a generous relief package that will create more economic activity and more demand for oil as a result… More spending means more money changing hands, more transport and more products.”
