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The share market has a shot at its longest winning run in three months after a post-Federal Reserve rally in the US accelerated overnight.
ASX futures edged up eight points or 0.11 per cent. The ASX 200 jumped 1 per cent yesterday to a third straight gain. The index has not risen for four consecutive sessions since June.
Oil climbed to its highest in nearly three years. Iron ore rose for a second day. Tin neared record levels. Gold faded to its weakest close in six weeks. The dollar regained 73 US cents.
Wall Street
US stocks built on Wednesday night’s post-Fed advance as contagion fears about China’s struggling Evergrande property group continued to subside. Energy and financial stocks led for a second night after oil and treasury yields surged.
The S&P 500 climbed 53 points or 1.21 per cent. The rally lifted the index into positive territory for a week that began with two straight declines. The index finished roughly 0.3 per cent ahead for the week.
The Dow Jones Industrial Average gained 507 points or 1.48 per cent. The Nasdaq Composite added 155 points or 1.04 per cent.
The mood on financial markets has improved since the Fed delayed any change to policy settings and as Asian markets signalled investors were less concerned about a possible collapse of China’s second-largest property developer. Evergrande shares bounced 17.62 per cent yesterday, fuelling a 1.19 per cent rise for Hong Kong’s main share index. China’s central bank once again pumped extra liquidity into the market.
“Uncertainty had been building around the path of the economy and the Fed instilled some confidence into markets yesterday,” Charlie Ripley, senior investment strategist for Allianz Investment Management, told CNBC. “In addition, other risks that have been weighing on investor sentiment like the debt ceiling and risks associated to China’s real estate market appear to be fading, which have dialed up investors’ appetite for risk.”
Bellwether stocks for the global economy rose with easing worries over China. Caterpillar gained 2.75 per cent, General Electric 4.49 per cent and Boeing 1.9 per cent.
The financial sector climbed 2.5 per cent as the yield on ten-year US treasuries surged more than 12 basis points, breaking above 1.4 per cent for the first time since mid-July. Lenders benefit from wider margins when rates rise.
Tech services provider Salesforce was the biggest tailwind for the Dow, rising 7.21 per cent on an earnings upgrade. Accenture climbed 2.49 per cent after raising its Q1 outlook.
Australian outlook
The domestic market has a chance to break a run of losing weeks but appears cautious following its biggest rally in seven weeks. The S&P/ASX 200 surged 73 points or 1 per cent yesterday and may not have a lot more to give after rising 122 points in three sessions.
The financial sector did much of the heavy lifting on Wall Street, climbing 2.5 per cent. However, similar gains are unlikely here, given the different outlooks for official rates. Long-term treasury yields in the US surged more than 12 basis points overnight, while Australian yields were this morning ahead less than a point.
Energy was Wall Street’s other standout, climbing 3.4 per cent after the international oil benchmark logged its highest finish since October 2018. Brent crude settled US$1.06 or 1.4 per cent ahead at US$77.25 a barrel.
Oil has been supported by declines in US inventories with supply slow to return following storm damage to facilities in the Gulf of Mexico.
“Another storm is expected to become a major hurricane in the Atlantic, but the long term track is still uncertain at this point,” Tariq Zahir, managing member at Tyche Capital Advisors, told MarketWatch. “Between the risk on environment in equity markets and uncertainty of future storms, we expect to maintain strength in the energy markets until more clarity is achieved.”
Also strong in the US overnight: industrials +1.55 per cent, materials +1.39 per cent and technology +1.35 per cent. The only sectors to retreat were utilities and real estate – bond proxies that lose appeal when yields rise.
The domestic economic calendar is empty today.
IPOs: two listings originally scheduled for today have been pushed back. Pacific Edge will list on Monday, Alvo Minerals on a date to be announced.
The dollar traded above 73 US cents overnight and was last up 0.89 per cent at 72.94 US cents.
Commodities
Iron ore firmed for a second day as concerns about demand from China’s property market subsided. The spot price for ore landed in China improved US$1.35 or 1.3 per cent to US$108.90 a tonne.
BHP‘s US-listed stock inched up 0.09 per cent after its UK-listed stock added 0.01 per cent. Rio Tinto lifted 0.69 per cent in the US and 0.35 per cent in the UK.
A collapse in demand for havens pushed gold to its lowest close in more than six weeks. Gold for December delivery settled US$29 or 1.6 per cent lower at US$1,749.80 an ounce. The NYSE Arca Gold Bugs Index declined 1.94 per cent.
Battery component tin was the night’s standout on the London Metal Exchange, rising 1 per cent towards record levels. Falling inventories have lifted premiums this year. The metal used in solder and traditional lead-acid batteries has gained more than 70 per cent this year, hitting an all-time high last month.
Aluminium firmed 0.4 per cent, nickel 0.7 per cent, lead 0.3 per cent and zinc 2.6 per cent. Copper eased 0.2 per cent to US$9,284.45 a tonne.
