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The share market has a post-pandemic high in its sights following gains on Wall Street and a strong night for commodity prices.
ASX futures climbed 58 points or 0.82 per cent as industrial metals and crude oil advanced. Mining giants BHP and Rio Tinto rose more than 2 per cent in overseas trade.
The S&P/ASX 200 weathered news of Victoria’s snap lockdown to inch up two points yesterday to its fifth gain in six sessions. This morning’s futures figure suggests the index should open within 25 points of its May 10 record close.
Wall Street
US stocks edged higher as a pandemic-era low in unemployment benefit claims bolstered confidence in the pace of the economic recovery.
The Dow Jones Industrial Average climbed 142 points or 0.41 per cent. The S&P 500 gained five points or 0.12 per cent. The Nasdaq Composite finished flat, easing two points or 0.01 per cent.
First-time claims for jobless benefits declined 38,000 to 406,000 last week, the lowest since March last year. Economists polled by Dow Jones had predicted a smaller decline to 425,000.
“The jobless claims print has been on a declining trend and this week’s figures mark a pandemic low,” Ali Jaffari, head of North American capital markets at Validus Risk Management, said. “As the U.S. economy progresses with its vaccination program and reopening measures, employment and labor force participation are expected to pick up in the coming months.”
Separate reports showed orders for core durable goods increased more than expected last month, and final GDP grew 6.4 per cent last quarter.
Industrials was the best-performing sector, reflecting expectations the economy was accelerating. Boeing climbed 3.87 per cent after European rival Airbus announced it was doubling production to meet a strong recovery in demand. Industrial powerhouse General Electric surged 7.09 per cent.
The Nasdaq flat-lined as a rise in treasury yields dulled demand for growth stocks. ‘Big Tech’ leaders Apple, Microsoft, Apple and Netflix all declined as traders favoured cyclicals. The Russell 1000 Value Index gained 0.61 per cent, versus a 0.34 per cent fall in the Growth Index.
Automotive giants Ford and General Motors had strong nights. A broker upgrade helped boost Ford 7.05 per cent. General Motors gained 2.91 per cent following reports the car-maker will resume production at five plants halted by a shortage in computer chips.
Australian outlook
The S&P/ASX 200 has shown remarkable strength over the last few sessions, skipping blithely past Victoria’s return to lockdown yesterday. The index has put on more than 160 points since last Wednesday’s four-week low, and should add to those gains this session.
The mid-month crypto/inflation tantrum appears to be well and truly in the rearview mirror. The looming end of the month may spur institutional buying today and on Monday despite a US market holiday. A new post-pandemic high over the next two sessions does not seem out of the question, given the strength of this morning’s futures lead.
US sector moves overnight play to ASX strengths. Industrials gained 1.37 per cent, financials 1.19 per cent and materials 0.74 per cent. Iron ore declined yesterday, but strong gains in industrial metals ensured BHP and Rio Tinto rose smartly in overseas trade.
Rate-sensitive growth stocks face headwinds if Australian bond yields follow US counterparts higher, as expected. The ten-year US yield was last up 2.5 basis points at 1.6 per cent. That helped pull US tech down 0.53 per cent, consumer staples 0.59 per cent and utilities 0.66 per cent.
The dollar rose 0.05 per cent to 77.43 US cents.
Commodities
Copper and other industrial metals flew higher, helped by strong US economic signals and a strike at BHP’s Chile copper mine. Benchmark copper on the London Metal Exchange jumped 2.4 per cent to US$10,205.15 a tonne. Aluminium and nickel rallied 3.5 per cent, lead 1.6 per cent, zinc 3.2 per cent and tin 2.3 per cent.
BHP and Rio Tinto forged higher despite another dip in iron ore. BHP’s US-listed stock advanced 2.46 per cent and its UK-listed stock added 2.57 per cent. Rio Tinto gained 3.47 per cent in the US and 2.71 per cent in the UK. The spot price for ore landed in China eased $4 or 2.1 per cent to US$187.65 a tonne.
US crude marked its highest close since 2018. West Texas Intermediate rose 59 cents or 0.9 per cent toUS$66.85 a barrel, the strongest finish since October 2018. Brent crude settled 47 cents or 0.7 per cent higher at US$69.20 a barrel.
“The mood in oil got much better after strong GDP data, as well as a great jobs figure,” Phil Flynn, senior market analyst at The Price Futures Group, told MarketWatch.
Gold lost its hold on US$1,900 as a rise in treasury yields dulled demand for alternative investments. Metal for June delivery settled $5.30 or 0.3 per cent lower at US$1,898.50 an ounce. The NYSE Arca Gold Bugs Index fell 0.94 per cent.
