Join our daily newsletter At The Bell to receive exclusive market insights
The share market has its sights on a five-month high after China relaxed Covid restrictions, boosting commodity markets and helping Wall Street to its best week since June.
The S&P/ASX 200 was poised to open around 42 points or 0.59 per cent higher, according to futures action. An advance of that scale would bring 7200 into play for the first time since June.
Iron ore, metals and crude jumped on Friday as China relaxed quarantine restrictions for incoming arrivals and announced fresh support for its ailing property market. Mining heavyweights BHP and Rio Tinto surged in overseas trade. The Australian dollar regained 67 US cents.
Wall Street
US stocks rounded out their best week since June with further gains on Friday as pro-growth measures in China added to market optimism after inflation eased in the US.
The S&P 500 put on 37 points or 0.92 per cent. The Nasdaq Composite gained 209 points or 1.88 per cent. A 4.06 per cent slump in UnitedHealth limited the Dow Jones Industrial Average’s rise to 32 points or 0.1 per cent.
Resource stocks rallied after China announced it would cut quarantine time for incoming arrivals from seven days to five, with three days of home isolation. Separately, the People’s Bank of China and banking regulator announced a sweeping rescue package for the nation’s property market.
The energy sector jumped 3.06 per cent as crude prices rallied. Basic materials gained 1.16 per cent.
“Positive news came out of China, which traders have been hoping for a long time in relation to Covid-19. China has lowered the amount of time that overseas passengers are required to remain in quarantine by two days; this is certainly not enough but a step in the right direction to promote global growth,” Naeem Aslam, chief market analyst at AVATrade, said.
Alibaba and other Chinese companies listed in the US rose. Casinos and travel stocks also drew a bid.
US stocks rallied for a second day in the wake of soft inflation data showing consumer prices increased less than expected last month, easing pressure on the Federal Reserve to keep hiking interest rates aggressively. The US dollar continued to slide. Bond markets were closed for Veterans Day.
“What we’re really seeing today is simply a follow-through on yesterday. There’s a lot of cash sitting on the sidelines that is being put to work,” Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder, told Reuters. “Perhaps it signals some type of bottom being put in the market, some type of line drawn in the sand.”
Tech stocks rallied even as crypto exchange FTX fell into bankruptcy and its high-profile CEO Sam Bankman-Fried resigned. Amazon climbed 4.31 per cent, Google parent company Alphabet 2.63 per cent and Apple 1.93 per cent.
Health care, utilities and consumer staples declined as investors rotated out of defensive assets into sectors with more upside in a recovery.
Friday’s gains extended the S&P 500’s tally for the week to 5.9 per cent, its best weekly return since June. Tech was the week’s standout, gaining roughly 10 per cent on hopes interest rates will not go as high as previously projected. The Nasdaq Composite advanced 8.1 per cent. The Dow gained around 4.1 per cent.
Australian outlook
The US inflation relief rally continued in the US on Friday, setting up the S&P/ASX 200 for a bright start to the week. Investors also welcomed support for China’s property market and a modest relaxation of China’s strict Covid quarantine policies, even as case numbers increased and lockdowns expanded.
The dollar popped above 67 US cents for the first time since mid-September. The Aussie was this morning ahead 0.19 per cent at 67.16 US cents.
A risk-on session in the US on Friday saw tech and resource stocks shine, while defensives were out of favour. The biggest rises were in energy, materials and three sectors dominated by Big Tech. Financials put on 0.79 per cent.
Health care fell 1.28 per cent, utilities 1.14 per cent and consumer staples 0.14 per cent.
Last week brought a sea change in ASX market themes. Out-of-favour precious metal miners shone, while coal miners – one of this year’s best-performing industries – slumped.
Major rises last week included Evolution Mining (+29.9 per cent), St Barbara (+27.8 per cent) and Regis Resources (+27.5 per cent). In the coal space, New Hope plunged 20 per cent, Whitehaven 19.4 per cent and Coronado 15.4 per cent.
The big question for investors this week is will the US relief rally continue? The Federal Reserve will be out in force, with speeches scheduled every day this week. The central bank’s take on last week’s inflation data will have a major impact on whether the rally rolls on.
Inflation is again on the schedule in the US, with wholesale data on Tuesday night. Retail sales on Wednesday night and jobless claims on Thursday could also have an impact.
At home, the minutes from this month’s RBA rates meeting are released tomorrow, but the week’s key data-point is the October jobs report on Thursday. Economists expect the report to show the first uptick in the jobless rate since last year’s Covid lockdowns, from 3.5 to 3.6 per cent.
Also this week: weekly consumer confidence (Tuesday); and quarterly wage price index (Wednesday). China releases factory, retail sales, employment and investment data tomorrow.
Another huge week of AGMs includes meetings for shareholders in: Flight Centre, Pinnacle Investment Management and Fonterra Shareholders’ Fund (today); AGL, Allkem and Lifestyle Communities (Tuesday); and Medibank, Beach Energy, Northern Star, HUB24, Weebit, Vicinity Centres, Cromwell Property Group, Pact Group, KMD Brands, Contact Energy and Hotel Property Investments (Wednesday).
Later in the week come meetings from: Goodman Group, Sonic Healthcare, Seven Group, Pilbara Minerals, Mineral Resources, Paladin Energy, IGO, Boss Energy, IPH, Altium, Growthpoint, SEEK, Ingenia and Johns Lyng (Thursday); and Mirvac, NIB, a2 Milk, Lendlease, PEXA, NextDC, Nanosonics and Qualitas (Friday). (Source for all listings: ASA.)
There are full-year earnings this week from Elders (today), Incitec Pivot and United Malt (Tuesday) and Nufarm and GrainCorp (Wednesday).
ALS Ltd releases half-year earnings today. Commonwealth Bank releases a Q1 trading update on Tuesday. Webjet releases first-half earnings on Thursday.
NAB trades ex-dividend on Tuesday, Westpac on Thursday and Orica, Washington H. Soul Pattinson and Coronado on Friday.
IPOs: there are signs of stirring this week after last week’s blank. Tiger Tasman Minerals was scheduled to list today at 12 pm AEDT. Tiger is a metals explorer with projects in WA and Queensland. Also pencilled in to list this week are Source Certain International and Toubani Resources (Wednesday); and Nightingale Intelligent Systems (Friday).
Commodities
Commodities rose on Friday, supported by pro-growth moves in China and a slide in the US dollar. (A lower US dollar makes dollar-denominated commodities cheaper for buyers using other currencies.)
As well as easing quarantine conditions, China’s Politburo Standing Committee issued 20 new guidelines for Covid policy. The new guidelines emphasised vaccinations and treatments and warned officials to minimise the impact of containment measures on the economy.
Separately, the People’s Bank of China and China Banking and Insurance Regulatory Commission announced 16 measures to assist the property sector, according to Bloomberg. The new measures included loan extensions for developers and smaller down payments for home buyers.
Iron ore jumped 5 per cent on the Dalian Commodity Exchange to 708.50 yuan (US$99.86) a tonne. Ore futures in Singapore rallied more than 8 per cent.
Dalian coking coal put on 3.7 per cent. Dalian coke added 4 per cent. Chinese steel products gained at least 2 per cent.
On the London Metal Exchange, benchmark copper rallied 2.6 per cent to US$8,501.90 a tonne. Aluminium surged 5.9 per cent, nickel 3.9 per cent, lead 3.1 per cent, zinc 5 per cent and tin 4.6 per cent.
BHP‘s US-traded depositary receipts soared 6.63 per cent. Earlier, the miner’s UK listing put on 5.22 per cent. Rio Tinto jumped 6.41 per cent in the US and 4.86 per cent in the UK.
Oil trimmed a losing week as hopes for stronger Chinese demand helped offset losses earlier in the week. Brent crude settled US$2.32 or 2.5 per cent ahead at US$95.99 a barrel. For the week, Brent fell 2.6 per cent.
Gold closed at its highest since August as the US dollar index dropped to its lowest in more than two months. Metal for December delivery settled US$15.70 or 0.9 per cent higher at US$1,769.40 an ounce. The NYSE Arca Gold Bugs Index closed little changed, up 0.03 per cent.
The yellow metal put on more than 5 per cent for the week amid hopes the US dollar has peaked with inflation expectations. The US dollar index lost more than 4 per cent last week after weak inflation data softened the interest rate outlook.
