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The share market will shoot for a fifth straight win after vaccine and stimulus hopes on Wall Street trumped spiralling virus rates and troubling signs about the US economy.
The ASX has rumbled higher all week and has a third straight weekly win firmly in sight following modest gains in the US. SPI200 index futures climbed 29 points or 0.4 per cent, setting up a not-quite-nine-month opening high.
Wall Street
US stocks kicked higher late in the session as investors weighed a brightening long-term economic outlook against near-term woes. More positive vaccine news helped offset rises in virus cases, business shutdowns and claims for jobless benefits. The market got a late lift from reports Senate Republicans agreed to resume negotiations for a new stimulus package.
The Nasdaq Composite led the rally, rising 103 points or 0.87 per cent as traders favoured Big Tech over recovery plays. The S&P 500 edged to a gain of 14 points or 0.39 per cent. The Dow Jones Industrial Average broke a two-day losing run with a skinny rise of 45 points or 0.15 per cent.
“Negative Covid headlines/increased economic lockdowns (especially in NYC and LA County) are starting to offset vaccine optimism, and that’s weighing on stocks,” Tom Essaye, founder of The Sevens Report, said. “We are now facing the biggest number of economic restrictions since the [northern] spring, and that will weigh on economic growth and, potentially, earnings.”
Confidence in the economy was dented by a jump in the number of Americans filing for unemployment benefits. New claims rose to 742,000 last week from 711,000 the previous week. The data stoked concerns the recovery was stalling as infection rates forced companies to stand down workers.
“There’s a feeling that the economic recovery will be slower than many thought based on the data,” Oliver Pursche, president of Bronson Meadows Capital Management, told Reuters.
Fragile market sentiment was bolstered by progress towards effective preventatives for Covid. The University of Oxford and AstraZeneca released preliminary data showing their vaccine candidate was safe and produced a positive response in volunteers in a Phase II trial. The vaccine now moves on to a Phase III trial.
Investors bought Big Tech, described by one US strategist as a “security blanket” in anxious times. Apple gained 0.5 per cent and Amazon 0.4 per cent. Alphabet added 1 per cent and Microsoft 0.6 per cent.
Australian outlook
Australian equities have been a one-way bet since the US election. The ASX 200 has risen almost 10.5 per cent in less than three weeks. There was further evidence of the weight of money behind this rally when the index jumped more than ten points in last night’s closing auction – a favourite time for fund managers and other institutions to buy. For a second day in a row, the market shrugged off US losses.
The trigger for yesterday’s late bump was likely the October jobs report. Almost 180,000 Australians went back to work last month as Victoria reopened. Treasurer Josh Frydenberg said four-fifths of the people who lost work at the start of the pandemic have returned to work or regained lost hours. The report added to confidence the economy was healing.
“I do think the data supported the local market,” ThinkMarkets Market Analyst Carl Capolingua said. “It put a floor under the losses. You look at the intraday chart, and at 11.30am (when the data was released) it marked a meaningful low. We gradually just got better and better from there.”
Energy and technology were the pick of the US sectors overnight, rising 1.5 and 0.8 per cent, respectively. Materials gained 0.4 per cent and financials 0.3 per cent. Health and utilities closed in the red.
Online retailer Kogan and several junior miners hold AGMs today. The September retail sales report is due at 11.30 am AEDT.
The dollar oscillated just below 73 US cents, lately trading flat at 72.96 US cents.
Commodities
Iron ore edged closer to US$130 a tonne as the nation’s most important export continued to defy concerns about a China trade war. The spot price for ore landed in China rose $1.05 or 0.8 per cent to US$128.30 a tonne.
The big two ore miners with overseas listings were subdued. BHP’s US-listed stock fell 0.49 per cent and its UK-listed stock 1.94 per cent. Rio Tinto edged up 0.03 per cent in the US after losing 1.7 per cent in the UK.
Oil eased as traders fretted about the demand implications of US shutdowns. Brent crude settled 14 cents or 0.3 per cent lower at US$44.20 a barrel.
Gold logged a third straight loss as haven-buying of the greenback depressed metals markets. Gold for December delivery settled $12.40 or 0.7 per cent weaker at US$1,861.50 an ounce. The NYSE Arca Gold Bugs Index of miners fell 1 per cent.
