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The share market was poised to open higher after Wall Street resumed its rally and oil and copper rebounded.
ASX futures climbed 23 points or 0.33 per cent. An advance of that scale would erase yesterday’s 15-point fall on the S&P/ASX 200 and get the benchmark back on track for a fifth week of gains for the first time since June 2021.
Overnight, oil rose for a second session. Copper logged its first gain in a week.
A huge week of corporate earnings continues today. Among the big guns reporting are Newcrest, AGL Energy, Stockland and Cochlear.
Wall Street
US stocks eked out slender gains as upbeat economic data maintained pressure on the Federal Reserve to raise rates aggressively. Gains in energy and tech stocks helped offset declines in real estate and healthcare.
The S&P 500 seesawed between gains and losses before closing ten points or 0.23 per cent higher. The Dow Jones Industrial Average edged up 19 points or 0.06 per cent. The Nasdaq Composite advanced 27 points or 0.21 per cent.
The outlook for interest rates continued to dominate trade. The odds on a 50 basis point rate hike continued to tighten despite solid economic data and signs the Fed remains committed to crushing inflation. CME’s FedWatch tool assessed the odds on a 50bp increase at 61.5 per cent, up from 57 per cent a week ago and 37 per cent a month ago.
“We’re at a point where people are trying to make a judgment about whether the inevitable higher interest rates are going to choke off the upside of the market,” Rick Meckler, partner at Cherry Lane Investments, told Reuters.
“There are really two camps – one who feels the worst is behind us and continue to buy these selloffs, and the camp that feels the worst is ahead of us and like this is some kind of bear market rally that will retreat.”
First time claims for unemployment benefits unexpectedly declined last week. Initial claims fell to 250,000 from 252,000 the week before. Economists had predicted an increase to 265,000.
A recovery in manufacturing in the greater Philadelphia area soothed concerns about a dramatic slowdown in July. The Philly Fed index rebounded to +6.2 from -12.3 in July.
Fed officials continued to signal higher rates in the months ahead. St Louis Fed President James Bullard said he would like to get the federal funds rate target up to 3.75-4 per cent by year-end from the current range of 2.25-2.5 per cent.
“We should continue to move expeditiously to a level of the policy rate that will put significant downward pressure on inflation,” Bullard said.
San Francisco Fed President Mary Daly was more cautious. She said it would be reasonable to increase rates by 50 or 75 basis points next meeting to get the cost of borrowing above 3 per cent by the end of the year.
Tech stocks were boosted by upbeat guidance from Cisco Systems. The multinational networking conglomerate’s shares rallied 5.81 per cent after it said supply-chain issues were easing.
Australian outlook
The bullish mood on the ASX has survived yesterday’s modest setback. Anything better than an 80-point plunge today will hand the index its longest run of weekly gains in more than a year.
Solid gains in resource stocks overnight account for some of the upbeat tone of this morning’s futures. Index heavyweights BHP and Rio Tinto advanced in overseas trade (more below). Energy was the pick of US sectors, bouncing 2.53 per cent. Basic materials rallied 0.26 per cent.
Tech was also positive, adding 0.49 per cent. Financials inched up 0.13 per cent. The night’s biggest market drags were real estate -0.75 per cent and healthcare -0.43 per cent.
The ASX has so far weathered a fairly uneven corporate reporting season. Aside from BHP, major upside surprises have been rare. Profit beats have tended to be overshadowed by cautious-to-negative outlooks.
The season rolls on today with updates from Newcrest, Stockland, Cochlear, AGL Energy, Cleanaway Waste, Inghams, TPG Telecom, Latitude Group and Accent Group (sources: CommSec, Australian Financial Review).
The dollar has fallen around two US cents this week from above 71 US cents on Monday. The Aussie was this morning down 0.24 per cent at 69.15 US cents.
Commodities
Oil logged back-to-back gains as a decline in US stockpiles and solid economic data helped offset worries about demand. US inventories contracted by seven million barrels last week, according to the Energy Information Administration. Gasoline stockpiles dropped by 4.6 million barrels.
Brent crude settled US$2.94 or 3.1 per cent higher at US$96.59 a barrel. Prices have fallen sharply this month as demand worries outweighed supply concerns.
“Oil prices have been crushed in August on recession fears, talk of a potential nuclear deal with Iran, and signs that the Chinese economy is faltering and that their oil demand is lagging,” Phil Flynn, senior market analyst at The Price Futures Group, said.
Copper bounced for the first time in a week amid hopes Chinese support for its economy will lift demand. Beijing this week announced an insurance backstop for some struggling property developers. Premier Li Keqiang urged officials from key provinces to support growth through new measures.
Benchmark copper on the London Metal Exchange rallied 1.5 per cent to US$8,045.25 a tonne. US-traded copper rallied five cents or 1.3 per cent to US$3.6315 a pound.
Elsewhere on the LME, aluminium declined 0.2 per cent, nickel 0.5 per cent, lead 2.1 per cent, zinc 1.3 per cent and tin 0.2 per cent.
Iron ore prices were mixed after electricity rationing forced some Chinese steel mills to halt production. The most-traded ore contract on the Dalian Commodity Exchange slumped almost 4 per cent to 678.5 yuan. However, the spot price for ore landed at Tianjin edged up 13 US cents or 0.1 per cent to US$104.72 a tonne.
BHP‘s US-traded depositary receipts rose 1.03 per cent. The miner’s UK listing gained 0.73 per cent. Rio Tinto put on 1.39 per cent in the US and 1.19 per cent in the UK.
Gold faded to a fourth straight loss and a three-week low as the US dollar strengthened. Gold for December delivery settled US$5.50 or 0.3 per cent lower at US$1,771.20 an ounce. The NYSE Arca Gold Bugs Index bounced 0.4 per cent.
