Aussie stocks are primed to open more than 2 per cent higher following two days of huge gains on Wall Street and a surge in iron ore prices.
ASX SPI200 index futures climbed 41 points to 6138 this morning, extending a 103-point futures rally heading into the Queen’s Birthday long weekend. That sets up the local market for a bumper start to the trading week after US stocks erased their losses for the year.
Wall Street leaped higher on Friday after unexpectedly strong jobs data suggested the US economy was resurging as lockdown restrictions began to ease. The rally resumed overnight, lifting the Nasdaq to an all-time high and the S&P 500 into positive territory for 2020.
The S&P 500 rose 38 points or 1.2 per cent overnight to move 0.05 per cent ahead for the year. The gains added to Friday’s tally of 82 points or 2.62 per cent amid optimism the post-pandemic economic recovery will be quicker than economists anticipated.
The Nasdaq Composite gained 111 points or 1.13 per cent overnight to become the first of the three major averages to record a new high since the COVID-19 pandemic triggered a fleeting bear market. The Dow put on 461 points or 1.7 per cent, extending an 829-point or 3.15 per cent surge on Friday.
The cause of Friday’s excitement was news of an unexpected rebound in employment. The jobless rate fell to 13.3 per cent in May from 14.7 per cent the previous month, confounding economists’ predictions that the rate would reach close to 20 per cent. The economy added 2.5 million jobs, versus an expected loss of more than 8 million.
“The numbers are a huge surprise to the upside,” Michael Arone, chief investment strategist at State Street Global Advisors in the US, told Reuters. “This is a strong signal that the effects are temporary and that the economy is improving.”
The rebounds from March 23 pandemic lows have been extraordinary. The S&P 500 has bounced more than 47 per cent and the Dow more than 50 per cent. By contrast, Australia’s S&P/ASX 200 has risen 36.3 per cent and remains more than 1,100 points off its February peak.
The US rally was spearheaded by stocks that will benefit most from the reopening of the economy. Norwegian Cruise Line Holdings soared 19.8 per cent overnight, Carnival 15.8 per cent, United Airlines 14.8 per cent, MGM Resorts 9.4 per cent, Delta Air Lines 8.2 per cent and Hyatt Hotels 6.3 per cent. All 11 sectors rallied, led by energy +4.3 per cent, utilities +2.6 per cent and real estate +2.2 per cent.
Mining stocks rose after iron ore was boosted by a court order stopping work at Brazilian giant Vale’s operations due to COVID-19. The stoppages are a boon for Australia’s exporters. BHP’s US-listed stock gained 2.39 per cent overnight and its UK-listed stock 0.3 per cent. Rio Tinto added 3.06 per cent in the US and 0.27 per cent in the UK. The spot price for iron ore landed in China surged $5.60 or 5.5 per cent to US$106.55 a dry ton.
Copper hit a three-month peak after a decline in inventories fuelled fresh buying. Benchmark copper on the London Metal Exchange advanced 0.2 per cent to US$5,680.50 a tonne. Aluminium improved 0.9 per cent, nickel 0.5 per cent and tin 0.8 per cent. Lead shed 0.9 per cent and zinc 0.6 per cent.
Oil fell back overnight after climbing 11.8 per cent last week ahead of an OPEC+ videoconference on Saturday that extended production limits until the end of next month. Brent crude settled $1.50 or 3.6 per cent lower at US$40.80 a barrel.
Gold rebounded from Friday’s two-month low. Gold for August delivery settled $22.10 or 1.3 per cent ahead at US$1,705.10 an ounce, recouping around half of Friday’s losses.
The dollar rose more than 0.5 per cent to 70.18 US cents.
The day ahead brings reports on May job advertising and business confidence. In the US, the Federal Reserve gathers for the start of a two-day policy meeting.