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Australian stocks were poised to open higher for a second day after Wall Street rose on confirmation the Federal Reserve will hike interest rates hard and fast to contain inflation and allow flexibility later in the year.

The Dow rallied for a fourth night. Big Tech and retailers, two of the biggest drags over the last week, both rebounded.

ASX futures climbed 13 points or 0.18 per cent. The S&P/ASX 200 rallied 26 points or 0.37 per cent yesterday, edging ten points into positive territory for the week.

Overnight, oil and iron ore rose. Gold and base metals turned lower. The dollar wallowed below 71 US cents.  

Wall Street

US stocks turned higher in afternoon trade after the Fed signalled it will raise its benchmark rate quickly in 50 basis point jumps, but may pause as soon as September.

The S&P 500 advanced 37 points or 0.95 per cent. The Dow Jones Industrial Average put on 192 points or 0.6 per cent. The Nasdaq Composite added 170 points or 1.51 per cent.

“Most participants judged that 50 basis point increases in the target range would likely be appropriate at the next couple of meetings,” the minutes from this month’s policy meeting said.

The bank raised its benchmark rate by 50 basis points this month, the biggest increase in 22 years. The bumper increase came after inflation hit a 40-year high.

The central bank said it was willing to raise rates past “neutral” to bring inflation under control.

“A restrictive stance of policy may well become appropriate depending on the evolving economic outlook and the risks to the outlook,” the minutes said.

However, Fed board member Raphael Bostic suggested earlier this week the bank could pause in September to assess the effect of several sharp increases. The benchmark rate would be 2 per cent by that meeting if the bank raises three more times by 50 basis points.  

“There weren’t any surprises [in the minutes] which is why we probably bounced,” Peter Boockvar, chief investment officer at Bleakley Advisory Group, told CNBC. “There’s nothing new in it, but the markets didn’t want to hear anything more hawkish than the hawkishness they already laid out.”

Retailers rebounded following positive trading updates from department store Nordstrom and Dick’s Sporting Goods. The SPDR S&P Retail ETF bounced 6.88 per cent. The sector has been under selling pressure since cost warnings last week from Target and Walmart.  

Nordstrom jumped 14.02 per cent after raising its full-year outlook, citing strong demand. Dick’s Sporting Goods bounced 9.69 per cent off a 52-week low despite a “cautious” outlook.

Tesla, Amazon and Nvidia provided much of the session’s momentum. Tesla gained 4.88 per cent, Amazon 2.57 per cent and Nvidia 5.08 per cent.

Australian outlook

Risk appetite picked up overnight after the Fed provided greater clarity on the rates cycle. Markets interpreted the minutes as pointing to a short, sharp series of increases followed by a possible pause to assess the effect on prices.

The retail sector, which had been under the pump for a week, was the night’s best performer. The consumer discretionary sector bounced 2.78 per cent on signs not all is doom and gloom in the American shopping mall. That should help turn this week’s slide in ASX retailers.

Energy was the other standout, rising 1.96 per cent following reports a proposed US-Iran nuclear deal was in trouble.

Tech gained 1.21 per cent, financials 0.8 per cent and materials 0.47 per cent. The defensive healthcare and utilities sectors sat out the rally. Both eased less than 0.1 per cent.

The S&P/ASX 200 has tightened its trading range this week, a sign volatility is settling down after a turbulent few weeks. The benchmark looks likely to continue inching towards a second straight winning week this session.

A move above 7200 would be the first step towards bringing buyers back to the market. The index has had three looks at that level without the momentum to break through.

Quarterly private-capital expenditure data, a key input into next week’s GDP number, are due at 11.30 am AEDT.  

IPOs: a rare double-header today. Demetallica at 11 am AEST is a minerals explorer spun out of Minotaur Exploration. The miner has projects in Queensland and SA. TG Metals at 1 pm is an explorer targeting WA’s Lake Johnston Greenstone Belt.  

The dollar dropped 0.2 per cent overnight to 70.87 US cents.

Commodities

Oil advanced as US inventories declined and the US’s special envoy to Iran told a Senate committee negotiations to revive a nuclear deal with Iran were unlikely to succeed. A new deal would allow the lifting of sanctions on Iranian oil.

“As of today the odds of a successful negotiation are lower than the odds of failure and that is because of excessive Iranian demands to which we will not succumb,” Malley told the Senate Foreign Relations Committee.

Brent crude settled 47 US cents or 0.4 per cent ahead at US$114.03 a barrel. The US benchmark rose 0.5 per cent.

Gold‘s four-session winning run ended as traders booked profits ahead of the Fed minutes. However, the precious metal pared its loss following their release. Gold for June delivery settled US$19.10 or 1 per cent lower at US$1,846.30 an ounce. The metal lately trimmed its decline to US$1,852, a loss of 0.7 per cent. The NYSE Arca Gold Bugs Index dropped 0.72 per cent.

Iron ore inched higher amid optimism about demand as Shanghai reopens. The spot price for ore landed at Tianjin climbed 24 US cents or 0.2 per cent to US$133.34 a tonne. The most active contract on the Dalian Commodity Exchange firmed three yuan (45 US cents) to 852 yuan.

Rio Tinto put on 0.87 per cent in the US and 1.89 per cent in the UK. BHP declined in both US and UK trade after merging its petroleum assets with Woodside. Falls of 0.46 per cent in the US and 10.51 per cent in the UK reflected different treatments of the demerger.

Industrial metals declined after weak US data this week raised doubts about the health of the global economy. Benchmark copper on the London Metal Exchange declined 1 per cent to US$9,367 a tonne. Aluminium dipped 1 per cent, lead 3.3 per cent, zinc 1.1 per cent and tin 0.4 per cent. Nickel gained 0.9 per cent.

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