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Hopes for a ‘Santa rally’ revived overnight after US stocks surged for a second session as investors discounted the economic threat from the omicron Covid variant.

The Nasdaq Composite jumped 3 per cent. The S&P 500 gained more than 2 per cent. BHP and Rio Tinto climbed in overseas trade after iron ore surged 8.1 per cent.

ASX futures rallied 22 points or 0.3 per cent. A positive close tonight would seal a fourth straight gain for the ASX 200 for the first time since August.

Wall Street

Last week’s biggest losers led as Wall Street continued to put the omicron scare behind it. Bargain-hunters snapped up tech stocks, as well as companies most closely tied to the economic cycle.  All 11 sectors advanced.

The Nasdaq Composite climbed 462 points or 3.03 per cent. The S&P 500 added 95 points or 2.07 per cent.

The Dow Jones Industrial Average, which led on Monday night, put on 494 points or 1.4 per cent. Last night’s rally extended the blue-chip average’s two-day gain beyond 1,100 points.

Investors have grown less fearful of the hit from omicron since the White House’s chief medical advisor, Dr Anthony Fauci, suggested the new variant posed less of a threat than delta. There was more positive news overnight when UK drugmaker GlaxoSmithKline said its antibody treatment was effective against omicron in lab tests.

“Time will tell whether investors are getting ahead of themselves but a couple of days without a negative omicron headline has the dip buyers flooding back in,” Craig Erlam, senior market analyst at OANDA, said. “A Santa rally may be underway but it will be a bumpy ride,” he added.

Investors scooped up Big Tech names that took a pounding during last week’s initial omicron sell-off. Apple gained 3.54 per cent, Amazon 2.8 per cent, Alphabet (Google) 2.87 per cent, Microsoft 2.68 per cent and Meta (Facebook) 1.55 per cent.  

“Things that were on sale are being bought, especially those higher multiple stocks,” Kim Forrest, chief investment officer at Bokeh Capital Partners, told Reuters.

Travel and tourism-related stocks continued to heal from a bruising week. Wynn Resorts gained 1.8 per cent, Norwegian Cruise Line Holdings 0.65 per cent and Boeing 1.45 per cent. The S&P 1500 Hotels, Restaurants and Leisure Industry Index put on 1.27 per cent.

Wall Street’s “fear gauge”, the VIX, declined 15.71 per cent. The volatility index hit a ten-month high last week.

China-facing stocks climbed after the People’s Bank of China stimulated the economy by reducing the amount of money lenders have to hold in reserve. The extra liquidity is intended to prod a economy that has been hampered by problems in the property market.

The House of Representatives appeared set to vote this morning on a deal to raise the debt limit after Republican and Democrat leaders reached an agreement. News wires reported Senate Minority Leader Mitch McConnell was confident enough Republicans would vote in favour for the measure to pass.

Australian outlook

The clouds continued to lift overnight, clearing the way for another up-leg this session. Wall Street has regained almost all of its losses since news of the new Covid variant broke. The S&P 500 finished just 15 points shy of pre-omicron levels.

The S&P/ASX 200 was hovering above 7400 before last week’s panic and looks set to narrow that gap significantly this session. All 11 US sectors advanced, suggesting  plenty of buying options.

Wall Street’s best performers were technology +3.51 per cent, consumer discretionary (Amazon, Tesla, etc) +2.36 per cent and energy +2.28 per cent.

Financials gained 1.8 per cent, materials 1.51 per cent and industrials 1.03 per cent. The tailenders were defensives: utilities +0.75 per cent and consumer staples +0.23 per cent.

The ‘risk on” mood lifted the dollar. The Aussie jumped 1 per cent to 71.19 US cents, supported by a surge in iron ore yesterday.

The spot price for ore landed in China soared US$8.15 or 8.1 per cent to US$108.55 a tonne. The rally followed customs data showing Chinese ore imports increased almost 15 per cent last month to their highest since July 2020.

“The surprise in import growth was driven by a rebound in commodity volume, probably reflecting improving infrastructure capex demand as local governments stepped up stimulus toward the turn of the year,” Michelle Lam, greater China economist at Societe Generale, told Reuters.

The share prices of mining giants BHP and Rio Tinto jumped in response. BHP‘s US-listed stock put on 3.62 per cent after its UK-listed stock gained 5.59 per cent. Rio Tinto rose 3.35 per cent in the US and 4.8 per cent in the UK.

The corporate calendar starts to lighten as the holiday slowdown nears. There are no IPOs or major AGMs listed for today.

Commodities

Oil rose for a fourth night as demand fears continued to diminish. Brent crude settled US$2.36 or 3.2 per cent ahead at US$75.44 a barrel.

The US benchmark rose above US$70 for the first time in two weeks. West Texas Intermediate for January delivery climbed US$2.56 or 3.7 per cent to US$72.05.

“Traders view the omicron variant of COVID as a less virulent threat, and expect global economic growth to be only marginally impacted,” Marshall Steeves, markets analyst at IHS Markit, told MarketWatch.

Gold logged its highest close in more than a week. Metal for February delivery settled US$5.20 or 0.3 per cent higher at US$1,784.70 an ounce. The NYSE Arca Gold Bugs Index firmed 0.63 per cent.

Copper struggled to hold initial gains following China’s decision to loosen lending restrictions. March copper edged up 0.1 per cent to US$4.34 a pound on Comex, but was lately down 0.1 per cent at US$4.334.

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