The reopening of the global economy kept stocks moving higher overnight despite civil unrest in the US and fresh shots in the Sino-US trade war.
Australian index futures edged up nine points or less than 0.2 per cent, indicating a cautious open following modest gains on Wall Street.
US stocks kicked off a new month at their highest level since early March as improving economic data helped offset six days of violent protests against police brutality. The S&P 500 climbed 11 points or 0.38 per cent to extend its recovery from its March pandemic low to 38 per cent. The Dow gained 92 points or 0.36 per cent. The Nasdaq added 62 points or 0.66 per cent.
Investors were encouraged by signs the economy is starting to climb out of the hole created by COVID-19 lockdowns. A measure of manufacturing activity improved to 43.1 last month from an 11-year low of 41.5 in April. A separate report showed construction spending declined less than expected in April.
The rest of the night's news was broadly negative. Violent protests continued in major cities across the country following the killing of George Floyd in police custody. President Donald Trump blasted state governors as "weak" for failing to quell unrest that has in some cities degenerated into looting and vandalism. Some high-street retailers shut stores and Amazon has reportedly scaled back deliveries.
China hit back at the White House's decision to end Hong Kong's special status after Beijing approved a new security law there. The Chinese government ordered state-run agricultural companies to halt purchases of some American farm produce, according to Reuters. The move threatens a Phase One trade deal secured by the White House after several years of rising tariffs. Sources said China was willing to suspend imports of other American products if Washington pursues further measures over Hong Kong.
Drugmaker Pfizer tanked 7.2 per cent after an experimental treatment for breast cancer flopped. Gilead sank 3.4 per cent after a trial of its COVID-19 candidate remdesivir delivered mixed results.
“Nothing that has happened since the market closed on Friday has been market positive,” Art Hogan, chief market strategist at National Securities, told CNBC. “We’re beginning to take US-China tensions seriously and you add on to that the massive amount of disruption going on in almost every major city in the country right now, none of that could be seen as market positive.”
Market momentum was maintained by stocks that will benefit most from the reopening of the economy. American Airlines and the Marriott International hotel group both climbed 7.4 per cent, Royal Caribbean Cruises 7.3 per cent, United Airlines 5.9 per cent and Hilton Worldwide 3.7 per cent.
Ten of eleven sectors advanced, led by real estate (+2.1 per cent), energy (+1.76 per cent) and financials (+1.2 per cent). Pfizer's splat helped drag the health sector down 1 per cent.
A surging iron ore price helped propel the S&P/ASX 200 up 1.1 per cent yesterday, underpinned by gains of 3.1 per cent in BHP and 4.1 per cent in Rio Tinto. Overseas buying was less enthusiastic. BHP's US-listed stock rose 2.44 per cent and its UK-listed stock 0.75 per cent. Rio Tinto added 1.76 per cent in the US and 1.48 per cent in the UK. The spot price for iron ore landed in China dipped 40 cents or 0.4 per cent to US$100.50 a dry ton.
Oil was boosted by reports OPEC and other major producers may meet a week early to discuss extending production caps. Brent crude settled 48 cents or 1.3 per cent higher at US$38.32 a barrel. The US benchmark eased five cents or 0.1 per cent to US$35.44.
Gold finished little changed after swinging through a US$23 range. Gold for August delivery settled $1.40 or less than 0.1 per cent weaker at US$1,750.30 an ounce.
Copper gained its highest level in three months after Chinese factory data came in stronger than expected over the weekend. Benchmark copper on the London Metal Exchange rose 2 per cent to US$5,458.25 a tonne. Nickel put on 2.4 per cent, lead 0.2 per cent, zinc 1.5 per cent and tin 2 per cent. Aluminium fell 1.1 per cent.
The dollar pushed through the 68 cent level, lately up 0.1 per cent at 68.04 US cents.
A busy day ahead brings reports on corporate operating profits and the national current account this morning, followed by a Reserve Bank policy statement this afternoon.