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ASX Today: ASX caps off worst week since GFC with more losses

Shares look set to open little changed after US stocks rose on reports politicians were on the verge of a coronavirus stimulus deal.

Australian index futures edged up a point or less than 0.1 per cent, indicating a neutral start after yesterday's wild ride for local investors. The S&P/ASX 200 tumbled almost 1.5 per cent yesterday before clawing back most of its losses.

Wall Street

The prospects for a new fiscal stimulus package continued to set the market direction in the US. Stocks shook off early losses after Democrat House Speaker Nancy Pelosi said a deal was "just about there".

The S&P 500 gathered momentum as the session wore on, finishing 18 points or 0.52 per cent higher. The Dow Jones Industrial Average put on 153 points or 0.54 per cent after being down as much as 170 points. The Nasdaq Composite added 21 points or 0.19 per cent.

While divisions remained on issues such as state and local funding, Pelosi, the leader of the Democrat negotiating team, insisted, "We can do something great, and I'm still optimistic about that." Any deal struck with the White House would still have to pass a hostile, Republican-controlled Senate. US stocks fell on Wednesday following reports Senate leader Mitch McConnell told the White House he opposed the proposed bill.

Market sentiment was boosted by news first-time claims for unemployment benefits fell below 800,000 last week for only the second time since March. The tally of 787,000 was significantly better than the 860,000 expected by economists surveyed by MarketWatch.

US election

Investors also kept an eye on electoral polling. Recent polls have indicated a win for Joe Biden and a potential clean sweep for the Democrats of the presidency, House of Representatives and Senate, clearing the way for a bigger stimulus bill.

“I think that narrative around what will happen if we have that 'blue wave' will be correct in the sense that next year you’re going to get a massive fiscal stimulus, you’re going to get a big boost to the economy. There’s no doubt that Main Street under this program is going to benefit,” hedge fund manager Paul Tudor Jones told CNBC. “But the other side of that is what also happens to financial assets. I think under a blue wave, and the Biden tax plan, financial assets over the long run suffer a great deal.”

Biden and President Donald Trump were due to face off in a second televised presidential debate at 11 am Australian Eastern Standard Time. The Democrat candidate's lead has reportedly shrunk in recent days.

Australian outlook

The prospects for the day appear tentatively positive: Wall Street up, oil up, gold down, iron ore and the dollar fairly flat. The local market yesterday survived its first serious test of investor willingness to buy retraces. The ASX 200 dived more than 90 points intraday following reports of foreign interference in the US election, but closed just 18 points or 0.3 per cent lower after investors "bought the dip". That is a healthy sign for market-watchers wondering if this month's rally has more legs.

Energy stocks had a stellar session in the US, surging 4.2 per cent after oil was boosted by positive US unemployment claims (more below). The US financials sector - a key component of the Australian market - rose 1.9 per cent as treasury yields touched four-month highs. The only sectors to miss the upswing were real estate (-0.8%), technology (-0.5%) and consumer staples (-0.2%).

The dollar stabilised just above 71 US cents, lately ahead 0.12 per cent at 71.13 US cents.

Commodities

Energy stocks were the night's standout US sector, rising 4.2 per cent as oil was lifted by economic data and hopes for a demand boost from stimulus measures. Brent crude settled 73 cents or 1.8 per cent higher at US$42.46 a barrel.

Gold stocks declined with precious metals. The NYSE Arca Gold Bugs Index fell almost 2 per cent. Gold for December delivery settled $24.90 or 1.3 per cent weaker at US$1,904.60 an ounce after trading as low as US$1,894.20.

BHP and Rio Tinto traded mixed in overseas action after iron ore eased for the first time in five sessions. BHP's US-listed stock gained 0.77 per cent after its UK-listed stock fell 0.45 per cent. Rio Tinto shed 0.53 per cent in the US and 0.8 per cent in the UK. The spot price for iron ore landed in China dipped 65 cents or 0.5 per cent to US$119.75 a tonne.

Copper fell back from the US$7,000 level as investors waited to see if market rumours of a Chinese stockpiling plan prove true. Benchmark copper on the London Metal Exchange dropped 1 per cent to US$6,907 a tonne. Aluminium and lead gained less than 0.1 per cent. Zinc put on 0.5 per cent. Nickel shed 0.4 per cent and tin 0.3 per cent.


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