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Aussie shares look set to open higher for a second day after a Federal Reserve pledge to keep buying bonds helped US stocks shrug off grim retail sales data.
ASX SPI200 futures climbed 26 points or 0.4 per cent. US stocks closed mixed but broadly higher. Iron ore, copper and oil advanced as the US dollar declined.
Wall Street
The Federal Reserve delivered a welcome shot in the arm near the end of a lacklustre session as investors weighed a sharp drop in retail sales against signs a stimulus deal is near.
The S&P 500 hit session highs after the Fed kept its benchmark borrowing rate near zero, as expected, and committed to buying U$120 billion of bonds each month until employment recovers. The index finished just short of a record with a rise of seven points or 0.18 per cent.
The Dow Jones Industrial Average, which had been underwater nearly all session, trimmed its loss to 45 points or 0.15 per cent. The Nasdaq Composite outperformed with an advance of 63 points or 0.5 per cent to a record close as traders bought companies seen as ‘pandemic-proof’.
The Fed upgraded its economic outlook for the US economy. Gross domestic product is now expected to decline 2.4 per cent this year, versus the 3.7 per cent slump predicted in September. The bank also raised its projections for the next two years and indicated it expects the jobs market to heal faster than previously predicted.
Congressional leaders continued to work on a new stimulus deal to support the economy. Senate Majority Leader Mitch McConnell said, “We made major headway for hammering out a targeted relief package… that can pass both chambers by bipartisan majorities. We agree we will not leave town until we’ve made a law.” Sources close to negotiations said a vote could come within 24 hours.
The market struggled for traction earlier in the session after data showed retail sales slumped 1.1 per cent last month. The sharp decline dented hopes for a strong Christmas shopping season. Economists polled by Dow Jones had predicted a smaller decline of 0.3 per cent.
“The numbers are much weaker than expected,” Gus Faucher, chief economist for PNC Financial Services Group, told CNN. “The economy looks much softer at the end of 2020.”
Australian outlook
The S&P/ASX 200 looks set for another shot at the 6700 handle. The index has poked its head through that level four times in the last three weeks but only closed above once. That was a week ago, before a string of setbacks including CSL’s vaccine flop, China’s coal ban and a retreat in iron ore.
Resource stocks may be asked to do the heavy lifting again today as strength in commodity prices offsets another up-leg in the dollar. The Aussie jumped around a quarter of a cent in the wake of the Fed meeting to 75.77 US cents. That presents a headwind to companies that generate a lot of their earnings in US dollars. These include CSL, Cochlear, Aristocrat Leisure, many tech companies and retailers such as Breville.
Technology and consumer discretionary were the pick of the US sectors, gaining at least 0.7 per cent. Financials edged up 0.1 per cent. The utilities sector declined as US treasury yields rose.
The market mood may change for better or worse with the 11.30 am AEDT release of November employment figures. Economists anticipate an increase in employment of around 41,000. The jobless rate is expected to hold steady at 7 per cent. Elders and MMA Offshore hold AGMs today.
Commodities
Iron ore rose for a second day as the shockwaves from a Chinese call for an inquiry into soaring prices continued to fade. The spot price for ore landed in China climbed $1.30 or 0.8 per cent to US$157.05 a tonne. BHP’s US-listed stock added 0.31 per cent and its UK-listed stock 0.17 per cent. Rio Tinto eased 0.32 per cent in the US and 0.96 per cent in the UK.
Oil rose on stimulus hopes, a weakening US dollar and a drop in US stockpiles. Brent crude settled 32 cents or 0.6 per cent ahead at US$51.08 a barrel.
US gold stocks advanced as gold settled higher, then surged again as the US dollar sank in the aftermath of the Fed meeting. Gold for February delivery settled $3.80 or 0.2 per cent higher at US$1,849.10 an ounce, then jumped another $12.60 or 0.7 per cent to US$1,867.90. The NYSE Arca Gold Bugs Index gained 1.5 per cent.
“The Fed meeting merely reinforced what we already knew, that they’re going to continue their easy-money policies for as long as it takes, with as much firepower as it takes,” Brien Lundin, editor of Gold Newsletter, told MarketWatch.
Copper rose near an eight-year high amid signs of strong demand from China. Stocks in London Metal Exchange warehouses are 30 per cent lower than mid-October, according to Reuters. Benchmark copper climbed 0.7 per cent overnight to US$7,813.50 a tonne. Aluminium gained 0.4 per cent, lead 0.1 per cent, zinc 0.7 per cent and tin 1.2 per cent. Nickel declined 1 per cent.
