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The share market has a seventh straight advance in its sights following a tech-led surge on Wall Street ahead of a new quarterly earnings season.
ASX SPI200 index futures jumped 48 points or 0.8 per cent, positioning the S&P/ASX 200 for its strongest open since late August.
The benchmark index has a shot at extending its longest winning run since June and another crack at a technical resistance level that has held since the February-March pandemic plunge.
Wall Street
US stocks pushed back towards September record highs as traders rotated into companies expected to outperform this reporting season. The S&P 500 rallied 57 points or 1.64 per cent and traded within 1 per cent of its old peak.
The Nasdaq Composite had its best session in a month, surging 296 points or 2.56 per cent on strong gains in the likes of Apple, Facebook and Amazon – so-called ‘stay-at-home’ winners from the pandemic. Apple soared 6 per cent ahead of the launch of a new iPhone tonight. Amazon put on 4.8 per cent, Facebook 4.3 per cent, Alphabet 3.6 per cent and Microsoft 2.6 per cent.
The Dow Jones Industrial Average climbed 251 points or 0.88 per cent, trailing the other major benchmarks as growth stocks outperformed value plays by almost three to one.
Adam Crisafulli, founder of Vital Knowledge in the US, said the market was “exhibiting a very strong pro-growth/momentum bias… The pivot away from cyclicals (which had been leading for the last two weeks) could reflect reduced near-term odds for fiscal stimulus.’”
Negotiations for a new coronavirus relief package appeared to stall once again over the weekend after the latest White House offer met resistance from both sides of the political divide. With the presidential election just three weeks away, investors appeared comfortable with the possibility nothing might happen until after November 3.
“There’s enough stimulus in the pipeline for now to kind of get us through year-end without causing a risk of a double-dip recession,” Mike Wilson, chief US equity strategist at Morgan Stanley, told CNBC. “And ultimately, no matter who wins the election, by the first quarter we’ll have an additional stimulus.”
Australian outlook
The session ahead looks like a true test of the momentum the market has built up since the Federal Budget. If SPI futures prove correct, the S&P/ASX 200 will open at a resistance level that has repelled previous assaults several times over the last four months.
Seven-session winning runs are rare, but the market has already defied expectations of a pullback over the last two sessions. On Friday, ThinkMarkets Market Analyst Carl Capolingua said, “I spoke to a bunch of contacts across the industry this morning, and everyone appeared to be of the opinion that today was going to be obvious profit taking day. Nobody expected us to close out the session and the week this strong. What does it mean when we don’t pull back on such an obvious pull back day?”
A convincing break above 6200 would open the gates to a move much higher. “6200 is clearly the next level of chart resistance,” he added. “So, I expect [this] week we’ll get a good read on whether we’ll fail there, or hopefully, push through and look upwards to those February highs.”
If the local market mirrors US action, investors should look to technology, telecommunications and consumer stocks to lead the way. Resource stocks brought up the rear. The financials sector gained 1.1 per cent.
The dollar eased 0.2 per cent to 72.1 US cents.
Commodities
Reversals in iron ore, crude oil and copper mean resource stocks could be a headwind this session. The US materials sector eased 0.15 per cent.
BHP’s US-listed stock lost 0.68 per cent and its UK-listed stock 1.19 per cent. Rio Tinto shed 0.64 per cent in the US and 1.48 per cent in the UK. The spot price for iron ore landed in China declined $2 or 1.6 per cent to US$125.85 a tonne.
The US energy sector edged up 0.3 per cent despite oil’s lowest finish in a week amid expectations of increased output following an end to risk events in Norway, the Gulf of Mexico and Libya. Brent crude settled $1.13 or 2.6 per cent lower at US$41.72 a barrel.
US gold stocks finished near flat as an overnight surge in risk assets dulled interest in alternatives. Gold for December delivery settled $2.70 or 0.1 per cent higher at US$1,928.90 an ounce. The Arca Gold Bugs Index of US miners gained 0.1 per cent.
Copper touched a three-week high before reversing. Benchmark copper on the London Metal Exchange hit US$6,785.25 per cent before closing 0.2 per cent weaker at US$6,728 a tonne. Aluminium gained 0.8 per cent, lead 2.1 per cent and zinc 0.2 per cent. Nickel lost 0.4 per cent and tin 0.2 per cent.
