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Australian stocks were set to open higher ahead of the August employment report after energy stocks led a rebound on Wall Street.

ASX futures firmed 31 points or 0.42 per cent as US stocks rose for just the second time in eight sessions.

Oil climbed to its highest since July. Iron ore fell to a one-year low. Gold gave back Tuesday night’s gains. Copper and other base metals rebounded.

Wall Street

The energy sector steered the major indices firmly higher following a sharp drawdown in US stockpiles and as broadly positive economic data lifted cyclical sectors.

The S&P 500 rallied 38 points or 0.85 per cent. The Dow Jones Industrial Average gained 237 points or 0.68 per cent. The Nasdaq Composite added 124 points or 0.82 per cent.

The energy sector flew up 3.8 per cent to a five-week high. Occidental gained 6.09 per cent, Devon Energy 7.29 per cent and Exxon Mobil 3.37 per cent.

The US oil benchmark settled at its highest since late July after US stockpiles declined for a sixth straight week. The drawdown of 6.4 million barrels was almost twice as large as analysts expected. Production in the US has been impacted by damage from Hurricane Ida along the Gulf Coast.

West Texas Intermediate for October delivery jumped US$2.15 or 3.1 per cent to US$72.61 a barrel. The international benchmark, Brent crude, rose US$1.86 or 2.5 per cent to US$75.46.

Investors were encouraged by strong manufacturing data. The New York Fed’s business conditions index jumped 16 points to 34.3 this month, beating the consensus by 17.1 points.  

August industrial production narrowly missed expectations, rising 0.4 per cent, versus predictions for growth of 0.5 per cent. The effects of Covid and Hurricane Ida helped slow growth from 0.8 per cent the month before.

Stocks tied to the health of the economy advanced. Caterpillar put on 1.68 per cent, Boeing 1.25 per cent and General Electric 1.77 per cent.

A rebound in treasury yields lifted lenders. Citigroup advanced 2.43 per cent, Wells Fargo 1.28 per cent and Bank of America 0.75 per cent. Higher rates generally equate to bigger profits for bank stocks.

The S&P 500 and Dow have struggled this month, logging their longest losing runs since February. However, the benchmarks have now risen twice in three sessions, suggesting basing action after recent setbacks.  

Australian outlook

A buoyant start coming up after sentiment on Wall Street improved. Cyclicals shone as investors seized on signs the economy may not have been hit as hard by the delta variant as last month’s jobs report suggested.

Energy was the standout, surging 3.8 per cent. Industrials gained 1.12 per cent, materials 1.09 per cent and financials 0.93 per cent.

The positive mood in the mining sector helped BHP and Rio Tinto shrug off another slump in iron ore (more below). BHP’s US-listed stock firmed 0.84 per cent and its UK-listed stock gained 0.52 per cent. Rio Tinto added 1.18 per cent in the US and 0.77 per cent in the UK.

The S&P/ASX 200 has been healing since last Thursday’s horror session when the index collapsed almost 2 per cent to its heaviest loss since February. The index has risen for three of the last four sessions and overcame early weakness yesterday to finish well off its low.

How today’s session finishes up will be largely determined by the August employment report at 11.30 am AEST. Today’s report is a true wild card – the first to show the full impact of lockdowns in NSW, Victoria and the ACT.  

Economists’ best guess for the jobless rate range from 4.8 per cent up to 5.5 per cent. In other words, it is expected to be ugly, but no one knows how ugly.

IPOs: Pearl Gull Iron lists today at 1 pm AEST. The explorer has mining title over part of Cockatoo Island off the north-west coast, an area with a history of iron ore mining. Another listing originally scheduled for today – Star Minerals – has been pushed back to September 30.

The dollar firmed 0.26 per cent to 73.34 US cents.

Commodities

Spot iron ore prices at Tianjin sagged to their lowest since last August after Chinese steel production declined for a third month. A report yesterday showed August steel output was the smallest since March 2020. The spot price for ore landed at Tianjin sagged US$6.95 or 5.8 per cent to US$113.40 a tonne.

Industrial metals rebounded in the wake of Tuesday night’s soft US inflation data and pressure on the US dollar. Benchmark copper on the London Metal Exchange rallied 1.9 per cent to US$9,608 a tonne. Aluminium bounced 2.2 per cent, nickel 2 per cent, zinc 0.9 per cent and tin 2.4 per cent. Lead fell 1.6 per cent.

Gold retreated from a two-week high, but remained firmly within its recent trading range. Metal for December delivery settled US$12.30 or 0.7 per cent lower at US$1,794.80 an ounce. The NYSE Arca Gold Bugs Index inched up 0.13 per cent.

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