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This week’s recovery in Australian stocks looked set to continue after Wall Street edged to record levels and a rebound in commodities accelerated.  

ASX futures climbed 18 points or 0.24 per cent, pointing to a third day of gains. The S&P/ASX 200 rose 13 points or 0.17 per cent yesterday amid signs of progress in the struggle against the delta Covid-19 variant.

Overnight, the S&P 500 and Nasdaq Composite inched to fresh highs. Iron ore joined a sharp reversal on commodity markets, surging 9 per cent. Oil, gold and copper advanced. The dollar moved above 72.5 US cents.

Wall Street

Cyclical stocks steered Wall Street higher as China’s success against the delta variant helped soothe market jitters about global growth. China reportedly began to ease restrictions after recording no new cases for the first time since July.

The S&P 500 edged up seven points or 0.15 per cent to its 50th record close of the year. The Nasdaq Composite climbed 77 points or 0.52 per cent, also closing at a fresh high. The Dow Jones Industrial Average trimmed its advance late in the session to 31 points or 0.09 per cent.

“Markets seem to believe that the latest Covid flare up has peaked, and that’s a good thing,” Jamie Cox, managing partner for Harris Financial Group, told CNBC. “Even though some airport data suggest traffic is rolling over a bit, any change to the trajectory of the delta variant will have that data rocketing back.”

Travel stocks enjoyed a second day of gains following the US regulator’s decision on Monday to grant full approval to the Pfizer-BioNTech vaccine. The S&P 1500 airlines index put on 3.74 per cent. Cruise lines gained at least 4 per cent. Wynn Resorts, which has a casino in Macau, jumped 7.01 per cent in expectation of the return of Chinese gamblers.

“We have energy, retail, travel, leisure, financials, and small caps all doing well today,” Ryan Detrick, senior market strategist at LPL Financial, told Reuters. “And that’s a sign that the reopening is alive and well.”

Detrick noted the S&P 500 had only twice before recorded 50 record closes by this time of the year: 1964 and 1995.

Chinese stocks spearheaded gains on the Nasdaq after US regulators clarified rule changes for Chinese companies listed in the US. Revised regulations will force Chinese companies to disclose political and regulatory risks. US-listed Chinese stocks tumbled this year following government crackdowns on tech, education and property.

Entertainment group Tencent bounced 8.81 per cent, ride-sharing app Didi 12.69 per cent and agritech Pinduoduo 22.25 per cent.

Australian outlook

The mood on global markets continued to improve overnight. Global growth worries have diminished with positive developments in China (zero Covid cases) and the US (full vaccine approval). New South Wales also offered a glimmer of hope yesterday, passing the six-million vaccination milestone and reporting a rare decline in case numbers.

While US stocks are back at record levels, the S&P/ASX 200 has so far been slow to follow. With lockdowns acting as a brake, the index has put on a modest 40 points this week, leaving it more than 120 points adrift of its August 13 record.

Travel stocks took flight on Monday and may have more to offer today. Commodity stocks should also outperform as markets continue to heal.

Energy stocks led in the US overnight, rising 1.61 per cent. The materials and financials sectors both put on 0.67 per cent.

A recovery in US treasury yields – another sign of improving optimism over the growth outlook – weighed on sectors that attract funds when yields are weak. Consumer staples declined 0.76 per cent, real estate 0.72 per cent and utilities 0.63 per cent.

Tech moves to centre stage today with full-year results from Afterpay and WiseTech, as well as Z1p Co. Also reporting today: Iluka, Worley, Adbri, Medibank, Ridley, Growthpoint and Nine Entertainment (source: CommSec).

Quarterly construction figures were due at 11.30 am AEST.

The dollar continued its recovery from last week’s collapse to 71 US cents, rising 0.72 per cent overnight to 72.6 US cents.

Commodities

Iron ore surged amid hopes for Chinese government support for flagging property and infrastructure. The spot price for ore landed at Tianjin bounced US$12.10 or 9 per cent to US$148.60 a tonne.

“People are hoping for some further stimulus targeting the infrastructure sector, as real estate and manufacturing are looking bleak,” Erik Hedborg, principal analyst at CRU Group, told Reuters.

BHP‘s US-listed stock firmed 1.24 per cent and its UK-listed stock gained 1.29 per cent. Rio Tinto rallied 2.86 per cent in the US and 2.97 per cent in the UK.

Oil firmed for a second session after a fire on an offshore platform shut down 125 wells in the Gulf of Mexico. Brent crude settled US$2.30 or 3.4 per cent higher at US$71.05 a barrel.

Reviving optimism about global growth lifted base metals. Benchmark copper on the London Metal Exchange rallied 0.8 per cent to US$9,378.50 a tonne. Aluminium gained 0.2 per cent, nickel 0.9 per cent, zinc 3 per cent and tin 2.2 per cent. Lead dipped 0.4 per cent.

Gold inched higher ahead of a speech by Federal Reserve Chair Jerome Powell tomorrow night. Powell is expected to address the possibility the central bank will start to wind back its inflationary bond-buying program.

Gold for December delivery settled US$2.20 or 0.1 per cent ahead at US$1,808.50 an ounce. The NYSE Arca Gold Bugs Index edged up 0.11 per cent.

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