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Australian shares look primed for an opening bounce after a positive session in Europe helped US futures edge higher during a public holiday.
ASX futures rallied 39 points or 0.6 per cent, signalling a rebound from yesterday’s 52-point market plunge.
Iron ore edged to a four-week high. Gold rallied. Oil declined. The dollar retreated further below 77 US cents.
Europe
European markets rose on below-average volumes while Wall Street traders took the night off for the Martin Luther King Jr public holiday. The pan-European Stoxx 600 climbed 0.2 per cent. Germany’s DAX added 0.44 per cent, France’s CAC 0.1 per cent and Italy’s FTSE MIB 0.53 per cent. Gains on the Stoxx were capped by a soft session in the UK, where the FTSE 100 slipped 0.22 per cent.
Market sentiment was boosted by upbeat economic data showing China’s economy accelerated last quarter. A report yesterday showed China’s GDP expanded by 6.5 per cent, well ahead of the 6.1 per cent growth anticipated by economists. Industrial production also surpassed expectations, increasing by 7.3 per cent in December.
On the eve of a new European earnings season, gains were capped by concerns about the impact on revenues of lockdowns and the slow pace of vaccine rollouts.
“Given how far stocks have come since the end of October some hesitancy about the next steps is understandable – much of the good news that may be imparted by earnings season has already been factored in,” Chris Beauchamp, Chief Market Analyst at IG, wrote.
US futures recovered from heavy falls during yesterday’s Australian trading hours. S&P 500 futures were lately ahead six points or 0.15 per cent after sinking more than 0.4 per cent yesterday. Regular Wall Street trade resumes tonight.
Australian outlook
The ASX looks likely to recoup at least some of yesterday’s fall. Trade during US holidays often sees the local market swing in one direction on the first session, then reset next day to more or less neutral before Wall Street resumes.
US futures recovered overnight amid no reports of violence during protests ahead of tomorrow night’s inauguration of Joe Biden as president. Heavy security around the country appeared to deter many Trump supporters. More than 25,000 National Guard have been deployed to Washington for tomorrow’s event.
The S&P/ASX 200 skidded 52 points or 0.78 per cent yesterday to its lowest close in eight sessions. The index has settled into a sideways trading band over the festive season and ended yesterday in the lower half at 6663, well above support at around 6585/6600.
A rebound in the US dollar to four-week highs produced clear winners and losers yesterday. Healthcare companies with significant US earnings rallied (Ramsay Health Care, ResMed). Miners declined as the rising greenback pressured oil, gold and other metals. The Australian dollar was lately buying 76.82 US cents.
The domestic quarterly reporting season is cranking into gear this week and should generate some volatility for traders. Rio Tinto reports today and BHP tomorrow.
Commodities
Iron ore inched to a four-week high following yesterday’s upbeat Chinese economic data. The spot price for iron ore landed in China rose 80 cents or 0.5 per cent to US$173.60 a tonne. BHP’s UK-listed stock eased 0.89 per cent. Rio Tinto bounced 0.47 per cent in the UK.
Oil declined amid concerns about the demand impact of lockdowns to contain fresh Covid outbreaks in China. Brent crude declined 35 cents or 0.6 per cent to US$54.75 a barrel.
Gold recovered as bargain-hunters stepped in when the precious metal slumped towards the US$1,800 an ounce level over the weekend. Gold for February delivery climbed $6.90 or 0.4 per cent overnight to US$1,836.80 an ounce.
Copper caught a lift from China’s strong GDP and industrial production readings. Benchmark copper on the London Metal Exchange rose 0.4 per cent to US$7,968 a tonne.
“Copper turned higher after Chinese data on Monday confirmed the strong economic recovery at the world’s top metals consumer,” commodities broker Anna Stablum of Marex Spectron wrote.
Aluminium lost 1.5 per cent, lead 0.1 per cent and zinc 0.7 per cent. Nickel gained 0.2 per cent and tin 0.4 per cent.
