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Resource stocks look set to spearhead early gains for the ASX following a spike in iron ore prices and skinny gains on Wall Street.

ASX SPI200 index futures climbed 20 points or 0.3 per cent as Wall Street overcame early weakness. Mining giants BHP and Rio Tinto hit multi-year peaks in US trade. Iron ore surged to a fresh six-year high.

Wall Street

US stocks struggled for much of the session after private employment data disappointed and political divisions slowed stimulus negotiations. The market inched higher after lunch.  

The S&P 500 rose seven points or 0.18 per cent to a new record close. The Dow Jones Industrial Average added 60 points or 0.2 per cent. The Nasdaq Composite eased six points or 0.05 per cent from Tuesday’s closing high.

“It is hard to get excited about stocks given the elevated levels and uncertainty over how much stimulus Congress will be able to deliver before the end of the year,” Edward Moya, OANDA senior market analyst, told MarketWatch.

Months of stimulus negotiations between the three branches of US government have yet to produce a result. CNBC reported Democratic and Republican party leaders in the Senate remain far apart on unemployment relief. Overnight, Democrat leaders called for support for a US$908 billion bipartisan bill already rejected by the House Republican leadership. House Republicans continued to advocate for a significantly smaller bill supported by the White House.

The need for fresh measures to support the economy was underlined by a grim private payrolls report. The private sector created 307,000 jobs last month, well short of the 420,000 expected by economists. The scale of the miss rang alarm bells for Friday night’s official government jobs report.

President-elect Joe Biden told the New York Times a stimulus package was a top priority. Biden also dampened hopes for a softer line on China, indicating no plans to immediately unwind tariffs imposed on Chinese imports under Donald Trump’s Phase 1 trade deal.

Australian outlook

Resource stocks kept the local market in positive territory yesterday and look set to do the heavy lifting today following strong gains overseas. Index heavyweights BHP and Rio Tinto claimed their highest levels on the New York Stock Exchange in several years. BHP climbed 4.14 per cent to its strongest price since 2014. Rio Tinto rose 4.04 per cent to a nine-year peak. By contrast, both companies’ local listings remain below recent July/August tops. In the UK, BHP put on 5.65 per cent and Rio Tinto 4.83 per cent.

The share prices of ore producers are playing catch-up with a sharp improvement in the price of ore in recent weeks. The spot price for ore landed in China jumped $3.70 or 2.8 per cent yesterday to US$136.75 a tonne. Data earlier this week indicated Chinese factory was expanding at its fastest rate since 2017.

The S&P/ASX 200 started the month well, but flagged yesterday. The index finished 1.7 points or less than 0.1 per cent ahead following a see-saw session. The index finished more than 90 points below its November eight-month high-point.

The broader mining spectrum struggled in US action overnight: the materials sector declined almost 1.4 per cent. Energy +3.2 per cent and financials +1.1 per cent were the pick of the US sectors.  

Domestic trade and construction reports are due this morning. The corporate calendar is light after last month’s busy AGM season. Overseas, OPEC continues to debate production caps on crude production.

The dollar pushed back above 74 US cents overnight, lately up 0.4 per cent at 74.07 US cents.

Commodities

Oil rose on “high-level leaks” from within OPEC indicating production caps due to expire next month will be extended for at least three months. Brent crude bounced 83 cent or 1.8 per cent to settle at US$48.25 a barrel.

“Talks between OPEC+ continued today and vibe appears to be a lot more diplomatic and delegates say that they are positive consensus will be reached tomorrow,” Energy Intelligence chief OPEC correspondent Amena Bakr tweeted.

Gold rose for a second day on the inflationary implications of a new multi-billion-dollar US stimulus deal. Gold for February delivery settled $11.30 or 0.6 per cent ahead at US$1,830.20 an ounce, adding to their biggest gain in three weeks. The NYSE Arca Gold Bugs Index edged up 0.3 per cent.

A firmer US dollar pressured industrial metals. Benchmark copper on the London Metal Exchange declined 0.3 per cent to $7,666.50 a tonne. Nickel eased 1.7 per cent, lead 1.5 per cent, zinc 1 per cent, aluminium 0.6 per cent and tin 0.5 per cent.

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