Join our daily newsletter At The Bell to receive exclusive market insights
The share market was poised to open tentatively higher ahead of a big afternoon for punters and investors, following tepid gains on Wall Street.
A strong finish helped the major US benchmarks eke out another round of record closes after trading in and out of positive territory.
ASX futures ended the night session 13 points or almost 0.2 per cent ahead, hinting at further gains after yesterday’s 47-point rebound.
The Reserve Bank meets today and is expected to release revised rates guidance this afternoon. Trading volumes will be affected by a public holiday in Victoria for the Melbourne Cup.
Wall Street
US stocks crawled to fresh highs, with a surge in small caps suggesting risk appetite remained strong ahead of this week’s Federal Reserve meeting. The Russell 2000 index jumped 2.65 per cent as the speculative end of the market outperformed the big guns.
The S&P 500 was underwater early afternoon, but firmed to a closing gain of eight points or 0.18 per cent. The Dow Jones Industrial Average put on 94 points or 0.26 per cent. The blue-chip average traded above 36,000 for the first time in history before trimming its advance to 35,914.
The Nasdaq Composite gained 98 points or 0.63 per cent as Tesla continued to outperform. The electric car maker climbed 8.49 per cent to a new record. Shares in the company have gone parabolic since an order from rental firm Hertz last week lifted it above US$1,000 a share.
The energy sector led after Bank of America predicted Brent crude will hit US$120 a barrel by the end of June next year. The sector gained 1.59 per cent as Occidental Petroleum put on 3.83 per cent and Exxon Mobil 1.78 per cent. The OPEC+ oil cartel meets this week but is not expected to ramp up production significantly.
Reopening stocks outperformed growth stocks. Airlines and retailers advanced. Casino stocks also gained.
“In our view, the key story arc driving equities is the strengthening global recovery,” Fundstrat’s Tom Lee told clients. “COVID-19 trends are improving, but with vaccinations and boosters, the improvement in healthcare risk could materially accelerate in 2022.”
The Federal Reserve meets tonight and is expected to announce tomorrow plans to unwind its US$120 billion-a-month asset buying program. Investors will look for reassurance that the start of the “taper” does not affect the bank’s rates outlook.
Australian outlook
A cautious start coming up ahead of a potentially market-moving RBA meeting today. Anyone not fixated on Flemington will scan the Reserve Bank‘s policy update at 2.30 pm AEDT for signs of a shift in the bank’s rates outlook.
The bank is expected to amend its policy to reflect strong moves in “real” rates as dictated by bond yields. The ten-year Australian yield smashed through 2 per cent last week for the first time in two and a half years. Notably, the RBA failed to defend its yield target for the three-year bond.
Any change this afternoon will have implications for investors and home-owners. Record-low rates have helped lift stocks and house prices to all-time highs.
The S&P/ASX 200 slumped 1.44 per cent on Friday as market rates surged. The benchmark clawed back around half of that yesterday as yields retreated.
Wall Street struggled for traction for much of the session, but finished well. Energy and consumer discretionary stocks led the way with gains of around 1.5 per cent. The materials sector put on 0.23 per cent and financials 0.08 per cent. Tech and health stocks finished narrowly in the red.
IPOs: another double-header today. RemSense Technologies at noon AEDT is a drone tech company. Aurum Resources at 1.30 pm is a subsidiary of Aldoro Resources which will contain three of Aldoro’s WA gold projects.
The dollar edged up 0.03 per cent to 75.2 US cents.
Commodities
Iron ore sank to its lowest since September as Chinese caps on steel production continued to undermine demand. The spot price for ore landed in China declined US$3.45 or 3.2 per cent to US$103.30 a tonne.
BHP and Rio Tinto were mixed in overseas trade. BHP’s US-listed stock shed 0.62 per cent and its UK-listed stock dropped 0.57 per cent. Rio Tinto tacked on 0.19 per cent in the US after finishing flat in UK trade.
Oil turned higher ahead of an OPEC+ meeting on Thursday that is expected to maintain the status quo despite multi-year highs in crude prices. Analysts expect the oil cartel will stick to increasing output by 400,000 barrels each month despite calls for significantly higher production to meet demand.
“For now, it looks as though the group will try to resist being more aggressive in its easing plan and stick to increasing output by 400,000 barrels per day per month,” Warren Patterson, head of commodities strategy at ING, said.
Brent crude settled 99 US cents or 1.2 per cent higher at US$84.71 a barrel. The US benchmark, WTI, rallied 48 US cents or 0.6 per cent to US$84.05.
LNG fell again in the US as mild weather weighed on speculative interest. December gas futures settled 4.4 per cent lower at US$5.186 per million British thermal units.
Gold reversed most of Friday’s fall as this week’s Federal Reserve meeting kept inflation near the top of investor concerns. Gold for December delivery settled US$11.90 or 0.7 per cent ahead at US$1,795.80 an ounce. The NYSE Arca Gold Bugs Index firmed 0.67 per cent.
The yellow metal has fallen into a sideways trading band, according to analysts at Sevens Report Research. The key levels for investors are “support at $1,725 and resistance at $1,835,” they wrote.
“Until one of those levels is violated gold will remain pinned in a sideways trading range,” they said.
Copper touched a two-week low before reversing higher. Benchmark copper on the London Metal Exchange fell to US$9,418, then bounced to a gain of 1.9 per cent at US$9,993 a tonne. Aluminium finished unchanged. Nickel gained 1.4 per cent. Lead fell 0.5 per cent, zinc 1.1 per cent and tin 1.3 per cent.
