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Aussie shares were primed for fresh 13-month highs after Wall Street’s record run continued and iron ore neared its strongest level in a decade.  

ASX futures climbed 37 points or 0.53 per cent, signalling the S&P/ASX 200 should start the week at its highest point since late February 2020. The All Ordinaries was set to break fresh ground after ending last week with back-to-back record closes.

Wall Street

Strong earnings and economic data helped US stocks push further into unchartered waters. The S&P 500 rose 15 points or 0.36 per cent to a closing peak. The Dow Jones Industrial Average climbed 165 points or 0.48 per cent, also finishing at a record. The Nasdaq Composite edged up 14 points or 0.1 per cent to within 1 per cent of its February high.

“Everyone is looking at just how far we can run before we start raising interest rates,” George Catrambone, head of Americas trading at DWS Group, told Reuters. “Until we see that significant inflation growth and the Fed starts to talk about raising interest rates, I think it’s going to be goldilocks conditions.”

The first week of the first-quarter reporting season did nothing to slow the rally. While individual companies often faced short-term profit-taking upon reporting, the financial sector recorded back-to-back record closes at the end of a week of updates from the likes of Goldman Sachs, Bank of America and Wells Fargo.

On Friday, Morgan Stanley topped earnings expectations but dipped 2.76 per cent. The bank’s shares have climbed 14 per cent this year. PNC Financial Services Group gained 2.33 per cent. US Bancorp rose 2.72 per cent.

A measure of consumer sentiment hit its highest level in a year. The University of Michigan’s preliminary sentiment index improved from 84.9 last month to 86.5. Reports the session before showed retail sales jumped 9.8 per cent last month and first-time claims for unemployment benefits dived to a 12-month low.

Also helping sentiment was a bullish outlook from Federal Reserve Governor Christopher Waller.

“I think the economy is ready to rip,” Waller told CNBC. “There’s still more to do on that, but I think everyone’s getting a lot more comfortable with having the virus under control and we’re starting to see it in the form of economic activity.”

Australian outlook

The market has strong momentum as a new quarterly reporting season shifts into gear. The S&P/ASX 200 has advanced for four straight weeks and looks set to open today within 100 points of last year’s all-time high. The older benchmark, the All Ords, set a new peak last week and has nothing but blue skies overhead.

Materials was Wall Street’s best-performing sector on Friday, rising 1.18 per cent. Financials gained 0.66 per cent and industrials 0.21 per cent. Technology was flat at -0.03 per cent. Energy provided the only significant down-pressure, falling 0.9 per cent.

First-quarter reports started to trickle in last week and will increase in volume as we near the end of the month. This week brings reports from BHP, Rio Tinto, Woodside Petroleum, Beach Energy, Brambles, AMP, Sydney Airport and Challenger. Wesfarmers and Blackmores hold investor days. Dexus holds its AGM on Thursday. Australian Pharmaceutical Industries releases half-year earnings on the same day.

This week’s floats include: financial services firm Latitude Financial Services (Tuesday); games-maker Mighty Kingdom and mining explorer Qmines (Wednesday); and nickel explorer Nickelx (Friday). Of those, the most interesting is arguably the twice-delayed IPO of Latitude, headed by former Australia Post CEO Ahmed Fahour.

Highlights on this week’s economic calendar include: the minutes from the last Reserve Bank meeting (Tuesday); February retail sales (Wednesday); quarterly business confidence data (Thursday); and preliminary manufacturing and services industry figures (Friday).

The US Q1 earnings season gets into its stride this week with reports from the likes of IBM, Intel, Netflix, Johnson & Johnson, Procter & Gamble and AmEx. Early results have the S&P 500 on track for its best season since 2010. Average earnings growth from last year’s Covid-affected first quarter is 30.2 per cent so far, according to FactSet. 

The dollar eased 0.08 per cent this morning to 77.26 US cents.

Commodities

Iron ore inched to its highest level in almost a decade as strengthening steel margins encouraged Chinese operators to increase production. Spot ore landed in China climbed 55 cents or 0.3 per cent to US$177.85 a tonne, a level last seen in 2011. Brazilian ore reached an all-time high despite a pollution crackdown in steel mills in the top steel-making city of Tangshan.

Steel margins in China are very attractive at the moment, so even with the restrictions in Tangshan, other producers have every incentive to try to increase operating rates,” ING head of commodities strategy Warren Patterson told the Australian Financial Review. “Stronger margins, along with more focus on reducing emissions, has also proved supportive for higher grade iron ore demand.”

The share prices of Australia’s big three producers hit record levels in early March but have since retreated. On Friday, BHP’s US-listed stock eased 0.43 per cent and its UK-listed stock shed 0.09 per cent. Rio Tinto added 1.21 per cent in the US and 1.17 per cent in the UK. Both companies release quarterly updates this week.

Oil dipped for the first time in five sessions, trimming its advance for the week to around 6 per cent. Brent crude settled 17 cents or 0.3 per cent lower at US$66.77 a barrel.

Gold capped its best week of the year with a second straight gain as the US dollar and bitcoin retreated. Metal for June delivery settled $13.40 or 0.8 per cent ahead at US$1,780.20 an ounce. The yellow metal put on around 2 per cent last week, its best return since December.

Copper trimmed its best week in two months following mildly disappointing Chinese factory activity. Benchmark copper on the London Metal Exchange fell 0.8 per cent to US$9,227 a tonne. Aluminium dropped 0.9 per cent, zinc 0.3 per cent and nickel less than 0.1 per cent. Lead rose 1.4 per cent and tin 0.5 per cent.

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