The share market will shoot for a fifth straight rise for the first time since June after US stocks muddled higher amid conflicting messages on stimulus talks.
Australian index futures edged up 12 points or 0.2 per cent, handing the S&P/ASX 200 a chance to extend its biggest four-session rally in almost six years.
The local benchmark has put on 311 points or 5.4 per cent since the start of the week as investors welcomed a stimulatory Federal Budget and a recovery on Wall Street.
US stocks ended with solid gains despite a mid-session wobble after Democrat House Speaker Nancy Pelosi doused hopes for a standalone stimulus bill for airlines. “There is no stand-alone bill without a bigger bill,” she told reporters. “There is no bill.”
Stocks had risen after US President Donald Trump said stimulus talks were starting to be productive. A day earlier, Trump fuelled a rebound on Wall Street by tweeting his support for targeted stimulus measures to support airlines and small businesses following his administration’s withdrawal from negotiations for a comprehensive coronavirus relief package for Americans.
Despite the latest setback, the S&P 500 finished 27 points or 0.8 per cent ahead at its highest point in a month. The Dow Jones Industrial Average put on 122 points or 0.43 per cent. The Nasdaq added 56 points or 0.5 per cent.
“It’s likely that there will continue to be near-term volatility due to the back-and-forth over a deal, the US elections, US-China tensions, vaccine developments, and increasing mobility restrictions due to rising Covid-19 cases in Europe,” Mark Haefele, chief investment officer at UBS Global Wealth Management, wrote. “But we do maintain a positive medium-term view for stocks into the middle of next year. A stimulus deal will be struck eventually, central banks will continue to stay supportive, and medical developments still have scope to surprise, in our view.”
The need for fiscal stimulus was underlined by news that claims for jobless benefits remained stubbornly high. Initial claims declined to 840,000 last week from 849,000 the week before, well above the 820,000 forecast by economists polled by MarketWatch.
Will a fifth straight advance prove a rally too far at the end of a memorable week when the market has already put on more than 5 per cent? The benchmark index faces strong overhead resistance around the 6150-6200 level, a zone where previous rallies failed in June, July and repeatedly in August. Alternatively, a push through that level would open the gates to a much stronger move higher.
“Some consolidation around these levels wouldn’t necessarily be a bad thing,” ThinkMarkets Market Analyst Carl Capolingua said. “Over the last few months, we’ve seen promising gains like these erased just as quickly. So, if we can even just hang around here, it will give investors great confidence that this time it’s different, that this time maybe we can break towards those pre-Covid highs.”
Energy stocks were the standout in the US, charging 3.8 per cent after Hurricane Delta closed more than 90 per cent of crude output in the Gulf of Mexico. While all 11 sectors advanced, the US rally had a slight defensive bias, with utilities and real estate the next-best performers and technology and consumer discretionary bringing up the rear.
The dollar continued to heal after a tumble earlier in the week. The Aussie climbed 0.41 per cent to 71.65 US cents.
The Reserve Bank releases one of its twice-yearly assessments of conditions in the financial system at 11.30 am EST.
Oil was well supported as shutdowns in the Gulf of Mexico and a strike in Norway dampened the production outlook. Brent crude settled $1.35 or 3.2 per cent ahead at US$43.34 a barrel.
Gold edged higher as grim US jobless claims figures underlined the need for more fiscal stimulus. Gold for December delivery settled $4.30 or 0.2 per cent ahead at US$1,895.10 an ounce.
Mining giants BHP and Rio Tinto reversed UK losses in US action. BHP’s US-listed stock rose 1.12 per cent after its UK-listed stock fell 0.91 per cent. Rio Tinto put on 0.52 per cent in the US and lost 0.47 per cent in the UK. The spot price for iron ore landed in China was steady at US$123.15 a dry ton ahead of the resumption of trade following Golden Week public holidays.
Aluminium touched a three-week peak amid signs of a slow recovery in demand from Covid lows. Benchmark aluminium on the London Metal Exchange rose 1.6 per cent to US$1,789.25 a tonne. Copper gained 0.2 per cent and nickel, zinc and tin 0.4 per cent. Lead dipped 0.4per cent.