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The final session of a strong trading year looked set for a subdued start after US stocks surrendered record levels overnight.

ASX futures eased seven points or 0.1 per cent ahead of a holiday-shortened session. The exchange will close two hours early this afternoon at 2.10 pm AEDT (including closing auction). Trading resumes on Tuesday.  

Overnight, the Dow and S&P 500 touched fresh highs before a late bout of profit-taking. Iron ore rose on the Dalian Commodity Exchange for the first time in four sessions. Oil and gold also rose. Copper declined.

The S&P/ASX 200 has put on 221 points or 2.9 per cent during a six-session end-of-year “Santa rally”. Barring a major setback this session, the index is on track for an annual gain of close to 14 per cent.

Wall Street

US stocks logged fresh highs as a decline in claims for unemployment benefits soothed concerns about the economic blow from surging omicron cases. The session soured in the final hour as traders booked profits from a week-long global rally.

The S&P 500 touched an intraday record at 4,808 before fading to a loss of 14 points or 0.3 per cent. The index finished the session at 4,779.

The Dow Jones Industrial Average‘s six-session win run ended as a 191-point opening rally wilted. The blue-chip average declined 90 points or 0.25 per cent as Microsoft, Nike and Procter & Gamble weighed. Just seven of the average’s 30 component companies closed higher. The Nasdaq Composite shed 25 points or 0.16 per cent.

New claims for jobless benefits fell last week, confounding expectations the omicron wave would fuel job losses. First-time claims dropped to 198,000 from 206,000 the week before. Weekly claims hit a record 6.149 million in April 2020.

Economists at Jefferies said the data “suggests that there has been no impact from Omicron as of yet”.

Also helping sentiment was a prediction from the US’s leading infectious disease advisor that the omicron wave would peak by the end of next month.

“I would imagine given the size of our country, and the diversity of vaccination versus not vaccination, that it’s likely to be more than a couple of weeks, probably by the end of January,” Dr Anthony Fauci told CNBC.

While Covid cases have hit record levels in the US this week, hospitalisations are roughly half the number in January. On Wednesday, the seven-day average of new cases hit a pandemic record of 301,472.

“It’s going to take some time for people to get attuned to the fact that cases don’t matter the same way they did in the past,” Amesh Adalja, senior scholar at the Johns Hopkins Center for Health Security, said. “We have a lot of defence against it.”   

Cruise lines retreated after the national health agency, the Centers for Disease Control and Prevention, warned Americans against cruise travel, even if vaccinated. Almost 90 cruise ships have reported Covid cases. Norwegian fell 2.46 per cent, Carnival 1.25 per cent and Royal Caribbean 1.11 per cent.

Australian outlook

A strong year looks likely to end on a subdued note. The more cautious of mind will note Wall Street will trade twice before the ASX reopens on Tuesday. The US has one last hurrah for 2021 tonight and goes straight back to work on Monday.

The S&P/ASX 200 is on a six-session win streak and appears likely to wrap up the year with an annual gain of around 14 per cent, give or take a few basis points.

Trading volumes today will be near or below Christmas Eve volumes, which at 279 million shares traded were the weakest of the year.

Much of the action this week has come at the speculative end of the market. The S&P/ASX Emerging Companies Index has rebounded strongly from its mid-November-to-early-December malaise. Yesterday’s rise lifted the index to within 2 per cent of last month’s all-time high.

Overnight, Wall Street continued to position for a possible retrace once institutional traders return to their desks. The night’s best-performing sectors were defensive for a third straight session. Real estate gained 0.36 per cent, utilities 0.34 per cent and health 0.16 per cent.

Cyclical and growth sectors mostly ended lower. Energy shed 0.68 per cent, technology 0.68 per cent, materials 0.37 per cent and financials 0.26 per cent.

The domestic economic calendar is empty today. China releases monthly manufacturing and services-sector reports at 12 pm AEDT. There are no initial public listings scheduled today.

The dollar continued to hover around the 72.5 US cent level, lately down 0.1 per cent at 72.51 US cents.

Commodities

Iron ore bounced off a two-week low. The most-traded contract on China’s Dalian Commodity Exchange rallied 2.4 per cent to US$106.59 a tonne.

While prices have steadied in recent weeks, ore is on track for an annual loss of around 10 per cent after China slapped pollution controls on steel mills. Prices peaked in May at almost twice current levels. Strict Covid controls and wobbles in China’s property sector have also curbed demand.

BHP and Rio Tinto finished mixed in overseas action. BHP‘s US-listed stock edged up 0.05 per cent after its UK-listed stock eased 0.25 per cent. Rio Tinto put on 1 per cent in the US and 1.12 per cent in the UK.

Oil eked out a seventh straight advance in the US, supported by falling US inventories and fading concerns about a demand hit from omicron. West Texas Intermediate rallied 43 US cents or 0.6 per cent to US$76.99 a barrel. Brent crude settled nine US cents or 0.1 per cent ahead at US$79.32.

“We’ve got oil prices showing some real strength into the end of the year and part of that is easing omicron fear and part of that is falling U.S. inventories,” Matt Smith, analyst at data and analytics firm Kplr, told MarketWatch.

Gold shrugged off a rising greenback as a dip in treasury yields encouraged investors to seek other stores of wealth. Metal for February delivery settled US$8.30 or 0.5 per cent ahead at US$1,814.10 an ounce. The NYSE Arca Gold Bugs Index rallied 1.89 per cent.

Copper declined for a second session. US-traded copper for March delivery eased two cents or 0.5 per cent to US$4.3925 a pound on Comex.

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