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Aussie stocks looked set to open cautiously higher after US investors welcomed a new infrastructure package.
The Dow Jones Industrial Average edged to a fresh intraday record, boosted by cyclical stocks that will benefit from increased spending on infrastructure.
The S&P 500 eked out an eighth straight advance. The Nasdaq Composite logged its longest winning run in almost two years, rising for an 11th session
ASX futures climbed nine points or 0.12 per cent. The S&P/ASX 200 broke a three-session winning run yesterday, closing just five points below Friday’s seven-week high.
Wall Street
The long-awaited passage of President Joe Biden’s flagship infrastructure bill late on Friday night provided a platform for another up-leg in this month’s “melt-up” in US stocks.
The Dow Jones Industrial Average hit a high early in the session, slimming an initial rise of 230 points down to 104 points or 0.29 per cent at the close. The S&P 500 added four points or 0.09 per cent, closing above 4,700 for the first time at 4,701.7. The Nasdaq Composite put on 11 points or 0.07 per cent despite pressure from Tesla.
The House of Representatives approved the White House’s US$1.75 trillion bill on Friday, almost three months after the package first cleared the Senate. The bill includes funding for roads, bridges, utilities and broadband.
“Investors have waited for a significant step-up in infrastructure spending for decades,” Citi’s Anthony Pettinari said. “We view this generational investment as a significant catalyst for growth for a number of our stocks.”
Materials, energy and industrials – three sectors expected to benefit from increased spending – were among the session’s winners. Heavy machinery manufacturer Caterpillar climbed 4.04 per cent to lead the Dow. Rival Deere gained 1.63 per cent, United States Steel Corp 2.75 per cent and Cleveland-Cliffs 5.55 per cent.
Overall gains were held back by a sharp sell-off in electric-car maker Tesla after CEO Elon Musk polled Twitter on whether he should sell 10 per cent of his extensive stock holdings. Almost 58 per cent of users who took part voted “Yes”. Tesla shares fell 4.92 per cent. Analysts said a sell-down by Musk would create an overhang for the stock.
US stocks have ground steadily higher this month, mostly in baby steps. The Nasdaq‘s winning run is its longest since December 2019.
“It’s a melt-up,” Zhiwei Ren, managing director at Penn Mutual Asset Management, told MarketWatch. “It’s a very bizarre rally.”
Also supporting the market were evidence of a rebound in employment last month and a stronger-than-expected corporate earnings season.
Australian outlook
Australian shares were poised for a tentatively positive start as the great American melt-up continued. These are benign conditions for investors. Daily gains are modest, but consistent. Volatility has plunged. Periods of calm such as this are rewarding, but never endure.
Different approaches to the Delta outbreak mean the ASX has underperformed Wall Street by some distance in recent months. The economic lag down under will take some time to iron out, but all the evidence from recent data suggests the economy should catch up quickly.
Business confidence figures released this morning showed sentiment is buoyant and trading conditions strong. NAB’s measure of confidence jumped from +10 to +21 last month. Conditions rose to +11 from +5.
“Conditions turned around in October, driven largely by the end of lockdown in NSW,” NAB Chief Economist Alan Oster said. “Confidence is now back in positive territory across all states and in all industries, signalling that there is broad optimism about the way recovery is tracking now that vaccine targets are within reach and restrictions are lifting,” he added.
The S&P/ASX 200 stuttered down five points or less than 0.1 per cent yesterday as investors held off to see if Wall Street would play nice overnight. Confirmation should clear the way for further gains this session.
Miners led the US advance. The US materials sector put on 1.23 per cent. Both BHP and Rio Tinto rallied (more below).
Also strong were energy +0.88 per cent, technology +0.58 per cent, financials +0.52 per cent and industrials +0.39 per cent. Utilities and consumer stocks declined.
Fortescue Metals holds its AGM today. Other companies holding annual meetings include Bendigo and Adelaide Bank and MNF Group.
IPOs: the debut of Dundas Minerals has been pushed back to tomorrow.
The dollar firmed 0.41 per cent overnight to 74.25 US cents.
Commodities
Oil rallied as investors bet on increased demand from US public-sector spending, and Saudi Arabia lifted export prices. Brent crude settled 69 US cents or 0.8 per cent ahead at US$83.43 a barrel.
Saudi Arabia’s state-run Aramco doubled the premium Asian consumers will pay for light crude from next month. The company also raised US prices and reduced discounts for European consumers.
“The price increments are much higher than market expectations and give a bullish signal on supply tightness,” Warren Patterson, head of commodities strategy at ING, said.
Iron ore clawed back a fraction of last week’s 13 per cent decline. The spot price for ore landed in China bounced US$1.10 or 1.2 per cent to US$93.85 a tonne.
BHP‘s US-listed stock improved 2.43 per cent and its UK-listed stock gained 0.73 per cent. Rio Tinto rebounded 2.75 per cent in the US and 1.12 per cent in the UK.
Gold‘s winning run stretched to a third session and a fresh two-month high. Metal for December delivery settled US$11.20 or 0.6 per cent ahead at US$1,828 an ounce. The NYSE Arca Gold Bugs Index dipped 0.1 per cent.
Copper rose for a second session, boosted by strong Chinese export data and the prospect of increased demand from the US. US-traded copper firmed 1.3 per cent US$4.399 a pound.
European gas prices jumped amid weak supply from Russia. Dutch gas futures reportedly gained as much as 9.7 per cent. Asian futures also rose.
