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The share market will shoot for a fifth straight advance following record closes on Wall Street and multi-year peaks in iron ore and copper.
Index futures point to an opening gain of around 42 points or 0.6 per cent. A start around those levels would bring the index within a few points of turning positive for 2020 for the first time since the February market collapse.
The S&P/ASX 200 has yet to record a loss this month, rising 0.3 per cent on Friday to within 50 points of where it began the year.
Wall Street
Stimulus hopes helped drive Wall Street’s three main indices to fresh highs on Friday as investors bet dire jobs figures would force politicians to the negotiating table. The November jobs report missed expectations by a huge margin, underlining the case for additional support for the economy. The US economy created just 245,000 jobs last month, nearly half the 469,000 predicted by economists. The increase was the smallest since May.
The report was “beckoning lawmakers to act on additional fiscal stimulus measures in order to bridge the output gap in the economy until a vaccine is deployed,” Charlie Ripley, senior investment strategist at Allianz Investment Management, told CNBC. “The longer they hold out the wider the gap may become.”
The S&P 500 climbed 32 points or 0.88 per cent as traders bought cyclical stocks that would benefit most from a stronger economy. The Dow Jones Industrial Average put on 249 points or 0.83 per cent. The Nasdaq Composite added 87 points or 0.7 per cent.
All three indices ended at record closing highs. The Russell 2000 index of small caps and Dow Jones Transportation Average also finished at records.
Friday’s action represented a swing back to cyclicals at the end of a week when Big Tech outperformed. The Nasdaq Composite gained 2.2 per cent for the week, versus 1 per cent for the Dow, and 1.7 per cent for the S&P 500.
Australian outlook
A historically strong month looks likely to keep giving today. While some of the momentum from the November rally has dissipated, the ASX has crept higher every session this month.
Expectations for a new US stimulus package sharpened on Friday. This week may show how serious the two sides (three, if you include the White House) are about narrowing their differences. So far, Wall Street has been happy to seize on any hint of progress.
Vaccine news will also be a major factor this week. Supply-chain issues at Pfizer and partner BioNTech triggered a fleeting setback on Thursday, but the market quickly recovered. Generally speaking, this market seems more interested in reasons to buy, than reasons to sell.
The US energy sector surged 5.4 cent on Friday as oil reached a nine-month high. Real estate, industrials and financials put on at least 1.1 per cent. BHP and Rio were part of a 2 per cent rally in materials. Iron ore and copper hit fresh multi-year peaks on Friday (more below), keeping resources stocks firmly in focus this week.
Banks will be back in the spotlight with a pair of AGMs: Bank of Queensland tomorrow and Westpac on Friday. Also holding AGMs this week: Washington H. Soul Pattinson on Wednesday and Pendal Group on Friday. Metcash releases earnings today. Ora Gold reports on Thursday. Perpetual holds an investor day on Wednesday.
Today brings updates on job advertising and services activity. Reserve Bank Governor Philip Lowe is due to deliver a speech this morning on innovation and regulation. Business confidence data are due tomorrow and consumer sentiment on Wednesday.
The dollar still looms as a potential headwind for exporters, sitting near a 28-month high. The Aussie edged up 0.04 per cent this morning to 74.25 US cents.
Commodities
Iron ore soared 5.4 per cent to its strongest level in almost eight years. The spot price for ore landed in China climbed $7.50 on Friday to US$145.30 a tonne, increasing its tally for the week to $14.35 or 11 per cent.
BHP‘s US-listed stock gained 2.39 per cent and its UK-listed stock 1.72 per cent. Rio Tinto added 1.86 per cent in the US and 1.28 per cent in the UK.
Oil settled at its highest level since March as traders backed OPEC’s decision to unwind production curbs in stages. Brent crude settled 54 cents or 1.1 per cent ahead at US$49.28 a barrel.
Copper touched its highest level since March 2013, boosted by Chinese stimulus-driven demand and hopes for more US fiscal relief. Benchmark copper on the London Metal Exchange rose 1.1 per cent to US$7,750.75 a tonne. Aluminium gained 0.7 per cent, nickel 2.8 per cent and tin 0.3 per cent. Lead slid 0.3 per cent and zinc 0.1 per cent.
Gold stocks dipped during a volatile session for the precious metal as traders mulled the demand implications of soft US jobs data. Gold for February delivery settled just $1.10 or 0.1 per cent weaker at US$1,840 an ounce after swinging through a $12 range. The NYSE Arca Gold Bugs Index slipped 0.58 per cent.
