Two weeks of positive momentum look likely to propel the Australian share market higher into a new week following slender gains on Wall Street.
ASX SPI200 index futures climbed 39 points or 0.6 per cent, suggesting a quick reversal of Friday's 0.5 per cent loss on the S&P/ASX 200. The index gained 1.2 per cent last week as a positive rates outlook and fiscal stimulus measures helped lift stocks to a seven-month high.
A mixed market eked out skinny gains as strong retail sales and consumer sentiment data helped soothe fears about the economy. The Dow Jones Industrial Average was the pick of the major benchmarks, rising 112 points or 0.39 per cent to its first gain in four sessions. The rally was driven by advances in Caterpillar and Boeing - companies whose performance depends heavily on a healthy economy.
A final-hour, end-of-week sell-off in big technology stocks helped cut the S&P 500's gain to less than a point or 0.01 per cent. The Nasdaq Composite finished 42 points or 0.36 per cent in the red as Apple, Amazon, Facebook and Netflix turned lower.
The market rallied after September retail sales increased by 1.9 per cent, more than twice what economists expected. A preliminary reading of consumer sentiment ticked up to 81.2 this month from 80.4 last month. September industrial production was less positive: a decline of 0.6 per cent.
“The economy continues to show pockets of strength, but those pockets need to widen,” Quincy Krosby, chief market strategist at Prudential Financial, told CNBC. “For those who still have their jobs, the economy has been healing. The question is, if initial unemployment claims continue to rise, will we continue to see retail sales surprising to the upside.”
Hopes for a pre-election stimulus package continued to hang in the balance. Treasury Secretary Seven Mnuchin reportedly told Democrat House Speaker Nancy Pelosi that President Donald Trump would "weigh in" with Republican Senate Majority Leader Mitch McConnell who has opposed the White House's latest relief package proposal.
The local market looks set to start a new week near a seven-month high as the domestic outlook continues to improve. The Federal Government delivered on of stimulus, the Reserve Bank is expected to lower the cash rate next month and the economy continues to re-open. Last night, the Victorian government relaxed the nation's toughest lockdown restrictions and flagged further changes on November 2.
Despite Friday's wobble, last week delivered several upside surprises, according to ThinkMarkets Market Analyst Carl Capolingua: "It's been a fantastic week," he said. "We've had some really strong quarterly updates. Eagers Automotive, GUD, HUB 24, Audinate, really, the list just goes on. We also saw profit upgrades from CSL, James Hardie, and a better than expected FY20 result from Bank of Queensland.
"It shows that for the most part, Australian companies appear to be managing the crisis reasonably well. Also, from an economic standpoint, we're relatively on top of the virus and our fiscal stimulus package is going to provide broad immediate support. This should provide some protection against a more protracted risk-off move if we do see one."
The domestic economic calendar is light this week. The minutes tomorrow from the last RBA meeting are a likely highlight. Chinese GDP figures at 1 pm EST today may also have an impact. Wall Street is likely to be dominated by the second week of earnings season, electoral polling and will-they-won't-they sparring in Washington over a new stimulus deal.
Friday's US action had a defensive bias: utilities and health were the best of the sectors, rising at least 1 per cent. The energy sector skidded 2.3 per cent, consumer discretionary 1 per cent and technology 0.3 per cent. The Dow Jones Transportation Average - used by some investors as a barometer for the health of the economy - sank 1.3 per cent.
The dollar dipped 0.04 per cent to 70.75 US cents as a new week began.
US energy stocks slumped 2.3 per cent as oil pared a winning week. Brent crude settled 23 cents or 0.5 per cent lower at US$42.93 a barrel, trimming its tally for the week to a slim 0.2 per cent.
The NYSE Arca Gold Bugs Index shed 1.4 per cent after the yellow metal logged its first weekly loss in three weeks. Gold for December delivery settled $2.50 or 0.1 per cent ahead at US$1,906.40 an ounce on Friday, but lost 1 per cent over the week.
BHP and Rio Tinto came under mild selling pressure as Wall Street stuttered late on Friday. BHP's US-listed stock eased 0.31 per cent after its UK-listed stock gained 0.34 per cent. Rio Tinto shed 0.83 per cent in the US and 0.24 per cent in the UK. The spot price for iron ore landed in China dipped 15 US cents or 0.1 per cent to US$119.05 a tonne at the end of a week when the ore price fell 5.4 per cent.