Australian shares looked set for tentative gains following a record close on Wall Street as strong earnings helped offset disappointing economic data.
ASX futures inched up seven points or 0.1 per cent. The S&P/ASX 200 yesterday rose 38 points or 0.52 per cent, climbing back into positive territory for the week following strong production updates from Rio Tinto and Fortescue Metals.
Overnight, the Dow and S&P 500 hit intraday highs. Gold had its best session since May. Oil and copper advanced. Iron ore sank more than 3 per cent, closing below US$200 a tonne. The dollar rose towards 74 US cents.
Commodity and bank stocks outperformed as US stocks shrugged off soft GDP and labour market data. The Dow Jones Industrial Average put on as much as 240 points before trimming its gain to 154 points or 0.44 per cent.
The S&P 500 also hit an intraday high, rising 19 points or 0.41 per cent. The Nasdaq Composite trailled with a rise of 16 points or 0.11 per cent following poorly-received quarterlies from Facebook and PayPal.
Traders found the positives in what initially looked like a big miss in gross domestic product. The economy grew at an annualised 6.5 per cent last quarter, well short of the 8.5 per cent predicted by economists polled by Dow Jones.
“The data was disappointing... but the details were quite constructive,” economists at investment bank Jefferies wrote. “Consumption was stronger than expected, rising by 11.8% annualized, and so was business investment, which rose 8%.”
Strength in consumer spending helped offset stubbornly high claims for unemployment benefits. First-time claims last week were 400,000, above the Dow Jones estimate of 385,000 and almost twice pre-pandemic levels.
A strong earnings season continued with well-received reports from Ford +3.82 per cent and KFC-owner Yum Brands +6.28 per cent. Facebook slumped 4.01 per cent after warning its targeted ad business will suffer from changes to Apple's privacy policies.
“The market is understanding we are having a blowout quarter here compared to a year ago,” Michael Reynolds, vice president of investment strategy at Glenmede, told CNBC. “What’s much more important this season is the guidance we’re getting on quarters ahead, as the economy settles out into what might be the new normal.”
Market sentiment remained positive after the Federal Reserve on Wednesday night signalled any tightening of monetary policy remains some way off. Chair Jerome Powell said the central bank had not yet seen "substantial progress" towards its goals of increasing employment and inflation.
The outlook for the session ahead is constructive, has been muddied a little by a fiercely negative reaction to Amazon's quarterly update released shortly after the end of regular US trade. Shares in Amazon - one of the so-called Fab 5 - were last down 6.75 per cent in after-hours trade.
The retail giant's report indicated the pandemic sales boom for online retailers had slowed significantly since the US reopened. The reaction to the report will likely depress US futures during the Australian session, which in turn would have a dulling effect on risk appetite here.
The ASX 200 rose firmly yesterday back towards record levels. The index finished just 14 points from Tuesday's record close despite more grim Covid-19 data in NSW.
Treasurer Josh Frydenberg last night warned of the risk of another recession if NSW does not get on top of the latest outbreak. State health authorities yesterday reported the highest number of new local cases since the start of the Greater Sydney lockdown five weeks ago.
Overnight action in the US played to the strengths of the Australian market. The materials sector gained 1.08 per cent, financials 1.07 per cent and energy 0.93 per cent. The night's only declines were communication services (dragged down by Facebook) -0.91 per cent and real estate -0.24 per cent.
The domestic Q4 reporting season winds up today with the usual rush of latecomers. Next week marks the start of the full-year earnings season.
On the economic calendar, quarterly producer prices and monthly private-sector credit data were due at 11.30 am AEST.
The IPO pipeline seems to be drying up. There are no listings today and at this stage few companies lining up next week.
The dollar has slowly recovered this week back towards 74 US cents. The Aussie was last up 0.23 per cent at 73.93 US cents.
A week of record production reports from the big three domestic iron ore miners helped offset a slide in the ore price. The spot price for ore landed in China fell US$6.25 or 3.1 per cent yesterday to US$195 a tonne.
Despite the decline, BHP's US-listed stock gained 1.43 per cent and its UK-listed stock 2 per cent. Rio Tinto put on 2.37 per cent in the US and 2.6 per cent in the UK.
The promise of loose monetary policy for many more months, combined with soft economic data, helped fuel gold's strongest session since May. Gold for August delivery settled US$31.20 or 1.7 per cent ahead at US$1,835.80 an ounce. The NYSE Arca Gold Bugs Index climbed 2.5 per cent.
Oil marked another two-week high as data showed drawdowns in US crude and gasoline stockpiles. Brent crude settled US$1.23 or 1.7 per cent higher at US$75.10 a barrel.
Industrial metals were boosted by a post-Fed weakening in the US dollar and by Chinese efforts to dampen market jitters. A strengthening yuan encouraged Chinese buying.
Benchmark copper on the London Metal Exchange rallied 1.4 per cent to US$9,799.50 a tonne. Aluminium improved 2.5 per cent, nickel 1.5 per cent, lead 1.2 per cent, zinc 0.8 per cent and tin 1.8 per cent.