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A fourth straight advance on Wall Street has set up Australian shares for solid opening gains as a stop-start week continues.
The S&P 500 in the US climbed to within 2 per cent of an all-time high as positive earnings updates and the lure of a new stimulus package offset soft payrolls data. Gold logged a fresh record, oil reached a five-month peak and iron ore and most base metals edged higher.
ASX SPI200 index futures finished the night session 27 points or almost 0.5 per cent ahead, indicating a positive start after yesterday’s 0.6 per cent setback for the S&P/ASX 200. Stocks slumped yesterday after Victoria reported a record number of new coronavirus cases and Queensland announced it will reclose its borders to NSW and the ACT this weekend.
The local market has lost momentum since mid-June while Wall Street has cruised serenely higher. Overnight, the Nasdaq climbed 57 points or 0.52 per cent to a new peak, briefly breaking above 11,000 for the first time before closing at 10,998. The S&P 500‘s rise of 21 points or 0.64 per cent brought it within 2 per cent of recouping all of its losses since the start of the COVID-19 outbreak.
The Dow gained 373 points or 1.39 per cent following an 8.8 per cent surge in Walt Disney. The media and theme park operator continued this earnings season’s run of upside surprises with an unexpected profit, thanks in large part to its hugely-successful new streaming services, which offset the closure of its theme parks.
This quarterly reporting season has defied gloomy expectations. With more than two-thirds of S&P 500 companies having reported, earnings have come in 23.5 per cent above expectations on average, according to Refinitiv data.
Unexpectedly strong earnings have distracted from signs that an anticipated V-shaped rebound in the economy has been stifled by renewed lockdowns to slow the spread of the virus. A dismal update from payroll provider ADP overnight dampened expectations for tomorrow night’s monthly government employment report. Private-sector employment increased by just 167,000 jobs last month, less than a tenth of the 1.9 million predicted by economists.
“Ouch,” wrote Pantheon Macroeconomics’ chief economist Ian Shepherdson.
Buyer appetite was bolstered by expectations feuding politicians will reach a compromise on a new US$1 trillion coronavirus relief package. The White House and Congressional Democrats were reportedly aiming to thrash out a compromise bill by the end of this week.
A risk-on session saw gains in industrials, materials and financials outweigh declines in defensive utilities, real estate and consumer staples.
BHP and Rio Tinto bounced back from yesterday’s weak Australian session. BHP’s US-listed stock surged 3.43 per cent and its UK-listed stock 4.7 per cent. Rio Tinto gained 4.43 per cent in the US and 3.9 per cent in the UK. The spot price for iron ore landed in China edged up 45 cents or 0.4 per cent to US$118.45 a dry ton.
Gold‘s record run continued into a fourth straight gain. Gold for December delivery settled $34.70 or 1.4 per cent ahead at US$2,049.30 an ounce, a new closing high. The precious metal has put on 34 per cent this year as the massive stimulus effort in the US depressed the greenback.
Oil posted its highest finish since early March as US inventories declined. Brent crude settled 74 cents or 1.7 per cent ahead at US$45.17 a barrel. US crude stocks declined 7.4 million barrels last week, according to the US Energy Information Administration.
Industrial metals cruised higher following strong manufacturing reports earlier in the week. Benchmark copper on the London Metal Exchange rose 0.7 per cent to US$6,498.75 a tonne. Nickel put on 2.2 per cent, lead 2.8 per cent, zinc 3 per cent and tin 0.7 per cent. Aluminium dipped 0.1 per cent.
The dollar climbed 0.43 per cent to 71.91 US cents.
