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Australian shares are pointing higher after gains in cyclical stocks helped Wall Street overcome a mixed start to a new earnings season.

ASX SPI200 index futures rose 28 points or 0.5 per cent, indicating a positive open and another reversal of direction. The index has not strung together consecutive moves in the same direction since a run of three losses at the start of last week.

US stocks rose as the traditional cyclicals of the Dow took over from the Big Tech stocks that have catapulted the Nasdaq to record levels. The Dow surged 557 points or 2.13 per cent, the Industrial Average’s third in a row as under-performing cyclical stocks play catch-up with ‘stay-at-home’ winners such as Amazon, Facebook and Netflix.

The S&P 500 put on 42 points or 1.34 per cent. The Nasdaq trailled with a gain of 98 points or 0.94 per cent.

All 30 Dow components rose, led by ‘old-school’ stocks such as heavy machinery manufacturer Caterpillar, up 4.8 per cent, insurer Travelers, up 3.8 per cent, and oil giants Chevron and Exxon Mobil, up 3.5 and 3.3 per cent, respectively. The Big Tech group of stocks was mixed: Amazon shed 0.6 per cent and Netflix 0.1 per cent; Microsoft and Alphabet gained 0.6 per cent, Apple 1.7 per cent and Facebook 0.3 per cent.

“I think this is the quarter that the underperforming sectors will mean-revert higher because we have likely overdone that trade that has ignored everything cyclical,” Art Hogan, chief market strategist at National Securities in the US, told CNBC. “It’s going to be very difficult for us to take a look at Microsoft, Apple, or Amazon and try to confirm those rallies with something we learn from the second quarter.”

A new quarterly reporting season got off to a soft start amid muted expectations. JPMorgan Chase was the best of the big names, edging up 0.6 per cent as a 79 per cent surge in trading revenue offset provisions for bad loans. High-street banker Wells Fargo sank 4.6 per cent after posting its first loss since the GFC. Citigroup gave up 3.9 per cent and Delta Air 2.7 per cent.

The energy and materials sectors led the advance following a recent rebound in commodity prices to multi-month/year highs. Oil hit a four-month peak last week, iron ore a one-year high this week and copper a two-year record.  

Australian giants BHP and Rio Tinto increased their gains as the 24-hour trading cycle shifted from here to London and New York. BHP’s listed stock advanced 0.3 per cent in Australia yesterday, then 0.76 per cent in the UK and 3.13 per cent in the US. Rio Tinto added 3.56 per cent in the US after gaining 1.36 per cent in the UK.

Iron ore edged higher after data yesterday showed Chinese imports climbed 16.8 per cent last month to the highest level since October 2017. The spot price for iron ore landed in China rose 55 cents or 0.5 per cent to a new one-year high of US$112.40 a dry ton.

Copper pared a steep rally that had propelled it to its highest level in two years as worries about the demand implications of renewed shutdowns in the US offset supply woes in Chile. Benchmark copper on the London Metal Exchange fell 1.2 per cent to US$6,491 a tonne. Aluminium dipped 0.9 per cent, nickel 1.1 per cent, lead 1.2 per cent, zinc 2.8 per cent and tin 1.5 per cent.

A weakening US dollar helped oil reverse early losses. Brent crude settled 18 cents or 0.4 per cent ahead at US$42.90 a barrel.

Gold also reversed initial losses, regaining the significant US$1,800 an ounce level. Gold for August delivery settled 70 cents or less than 0.1 per cent in the red at US$1,813.40 an ounce after trading as low as US$1,791.10.

The S&P/ASX 200 has drifted into a sideways trading pattern over the last month as rising coronavirus infections here and in the US threatened to undermine the economic revival from the pandemic. The local benchmark shed 36 per cent or 0.4 per cent yesterday as the tech sector suffered its biggest drop in almost three months.

The dollar rose more than 0.4 per cent overnight to 69.73 US cents as the greenback weakened.

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