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The ASX looks set for a sixth straight all-time high after progress for a US$1 trillion infrastructure bill lifted the Dow and S&P 500 to fresh peaks.

The market has broken new ground for the last five sessions and has 7600 in its sights after rising 24 points yesterday to 7563.

ASX futures rallied 19 points or 0.25 per cent overnight, ahead of earning reports this morning from Commonwealth Bank, insurer IAG and lithium miner Mineral Resources. 

Overnight, oil rebounded. Gold rose for the first time in four sessions. Copper reversed Monday’s fall. Iron ore’s slide continued: spot ore fell more than 5 per cent to its lowest since March.

Wall Street

Stocks tied to economic growth rallied after the Senate passed a US$1 trillion infrastructure package. An on-going recovery in treasury yields lifted lenders, but weighed on growth stocks.

The Dow Jones Industrial Average climbed 163 points or 0.46 per cent to a new closing high. The S&P 500 inched up four points or 0.1 per cent. The growth stock-heavy Nasdaq Composite eased 72 points or 0.49 per cent.

Investors bought industrials, energy and materials as President Joe Biden’s infrastructure package cleared the first hurdle. The bill includes spending on roads, bridges, airports and broadband.

The bill now moves to the House of Representatives. With bipartisan support, it is expected to clear the House, allowing it to become law. A second infrastructure spending bill valued at US$3.5 billion is much more contentious. The Democrat leadership in the Senate hopes to pass that bill without Republican support.

“The market is looking at it as part one is a done deal, the market is okay with that,” Ken Polcari, managing partner at Kace Capital Advisors, told Reuters.

“I do not believe the market is going to be okay with US$3.5 trillion but there is still the possibility they are able to block it, or slow it, and have more conversation so the market isn’t focusing on that one yet.”

Heavy machinery firms Caterpillar and Deere gained around 2 – 2.5 per cent. Steelmaker Nucor jumped 9.58 per cent. Infrastructure ETFs rallied.

The yield on ten-year US treasuries climbed more than three basis points to 1.357 per cent, the highest in three weeks. Yields have improved for the last five sessions as growth concerns faded.

Lenders that benefit from higher rates through improved margin opportunities advanced. Wells Fargo and Goldman Sachs both put on around 2 per cent. Bank of America added 1.87 per cent.

Growth stocks whose valuations are tied to lending rates declined. The FAANG group of tech leaders – Facebook, Amazon, Apple, Netflix and Google parent Alphabet – all retreated.

Australian outlook

Another day, another record.

Bad news seems to bounce off this market like bullets off Superman’s chest. The higher Covid numbers go in China, the US and NSW, the further the ASX rises. Bears must be tearing their hair out.

The S&P/ASX 200 climbed 24 points or 0.32 per cent yesterday to another record close, thanks in large part to solid earnings and a recovery in bond yields.   

How this session plays out will depend to some extent to the reaction to full-year earnings from Commonwealth Bank. The largest of the big four has the weighting to move the index by itself. The bank is expected to report a net profit after tax of around $9.57 billion and announce a share buyback to reduce a capital buffer amassed as a shield against pandemic bad debts.

Also due to report today: insurer IAG and lithium miner Mineral Resources.

BHP and Rio Tinto continued to defy the gravitational pull of collapsing iron ore prices. President Biden’s infrastructure bill offered a convenient safety net after the spot price for ore landed in China slumped US$9 or 5.3 per cent to US$162.20 a tonne.

BHP‘s US-listed stock climbed 1.29 per cent as the US materials sector rallied 1.48 per cent. Earlier, the Big Australian’s UK-listed stock added 0.87 per cent. Rio Tinto put on 1.6 per cent in the US and 1.22 per cent in the UK.

Other US sectors to shine included energy +1.72 per cent, industrials +1.01 per cent and financials +1.01 per cent. Tech stocks fell 0.73 per cent, real estate 1.09 per cent and health 0.24 per cent.

On the domestic economic calendar, Westpac’s August consumer sentiment survey at 11.30 am AEST is expected to show a sharp downturn as lockdowns bite.

IPOs: Cobram Estate Olives lists at 11 am today. The company owns Australia’s two best-selling domestic olive oil brands – Cobram Estate and Red Island. Cobram produces roughly 70 per cent of the nation’s total olive oil crop.  

The dollar rebounded 0.26 per cent overnight to 73.49 US cents.

Commodities

Oil rallied as the passage of the US infrastructure bill took the spotlight off the spread of the delta coronavirus variant. Brent crude settled US$1.59 or 2.3 per cent ahead at US$70.63 a barrel.

“Crude prices are rebounding as the rout that stemmed from delta variant concerns has run its course,” Edward Moya, senior market analyst at Oanda, wrote.

A three-day rout in gold also showed signs of abating. Gold for December delivery settled US$5.20 or 0.3 per cent higher at US$1,731.70 an ounce despite rising US yields. The NYSE Arca Gold Bugs Index fell 1.6 per cent.

“Gold has stabilised after a turbulent start to the week,” Craig Erlam, senior market analyst at Oanda, wrote.

Copper improved as the threat of a strike hovered over BHP’s Escondida mine in Chile, the world’s largest producer. Unions and BHP extended talks for an extra day after failing to reach agreement.

Benchmark copper on the London Metal Exchange bounced 1.6 per cent to US$9,494.25 a tonne. Aluminium rose 1.2 per cent, nickel 1.8 per cent, lead 2 per cent, zinc 1.6 per cent and tin 0.9 per cent.

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