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The share market has a strong shot at breaking its longest weekly losing run of the year after US stocks rallied on news of a deal to avert a government default.
ASX futures firmed 39 points or 0.54 per cent. Anything less than a heavy loss today would hand the market its first weekly advance in five weeks. The S&P/ASX 200 is already 71 points ahead for the week following a 50-point rally yesterday.
Overnight, Wall Street’s three main indices each put on at least 0.8 per cent. Oil and copper rebounded. Gold and natural gas declined.
Wall Street
Tech and cyclical stocks rose in tandem as part of a broad advance after lawmakers struck a deal to raise the federal debt ceiling by US$480 billion. The stop-gap measure will allow the government to meet its liabilities until December 3.
“The deal takes the near term risk off the table… and allows Democrats to turn their focus to finding a compromise on the multi-trillion reconciliation package,” Aptus Capital Advisors portfolio manager David Wagner told Investing.com.
The S&P 500 rallied 36 points or 0.83 per cent. The Dow Jones Industrial Average gained 338 points or 0.98 per cent. The Nasdaq Composite added 152 points or 1.05 per cent.
The agreement, announced on the floor of the Senate, removes one of the overhangs that held back financial markets during September. Majority Leader Chuck Schumer said lawmakers hoped to pass a bill as soon as this morning.
Senate Republicans had resisted previous attempts to raise the debt ceiling over what they saw as reckless Democrat plans to increase spending. The temporary truce averts what would have been a first-ever default by a US administration.
The rally was broad enough to encompass both growth and value ends of the investing spectrum. General Motors gained 4.75 per cent, Twitter 4.39 per cent, Apple 0.91 per cent and Home Depot 2.08 per cent.
Sentiment was also boosted by a sharp drop in claims for unemployment benefits. First-time claims fell to 326,000 last week from 364,000 the previous week. The decline sharpened hopes the economy was regaining momentum after a Delta-fuelled summer slowdown. Economists polled by Dow Jones expected a smaller fall to 345,000.
The major indices finished off their highs as caution set in ahead of tonight’s September jobs report. A strong result tonight may prompt the Federal Reserve to reduce support for the economy – the long-awaited bond “taper”.
Australian outlook
A choppy week looks like coming to a bright conclusion. Volatility has diminished. While the S&P/ASX 200 has struggled to build momentum, the index has stayed well clear of last Friday’s four-month closing low. A 50-point rally yesterday sets up what should be a winning week, the first since the start of September.
Any irrational exuberance will be constrained by tonight’s US jobs report. Wall Street’s main indices finished at session lows as cautious traders reduced exposure. The market has had plenty of notice that the bond taper is coming, but may still throw a hissy fit when the inevitable happens, whenever it happens.
Consumer discretionary and mining stocks outperformed in the US, rising 1.5 and 1.35 per cent, respectively. Also strong were healthcare +1.23 per cent, technology +0.91 per cent and industrials +0.77 per cent.
The financial sector gained 0.59 per cent. Utilities was the night’s only loser, falling 0.53 per cent as investors favoured sectors with better exposure to the economy.
Markets will keep a wary eye on China today as trade resumes after a week of holidays. Signs of strain in the Chinese real estate market have contributed to global wobbles over the last month. Caixin releases a gauge of Chinese services-sector activity at 12.45 pm AEDT.
The Reserve Bank releases its twice-yearly Financial Stability Review at 11.30 am AEDT.
The dollar hit a three-week high overnight, climbing 0.41 per cent to 73.09 US cents.
Commodities
Natural gas continued to lose ground after Russia’s offer to increase supply to Europe. US-traded gas futures slipped 11.5 cents or 2 per cent to US$5.556 per million British thermal units. Prices tanked 10.1 per cent on Wednesday after hitting a 13-year high the session before.
Oil clawed back some of Wednesday’s 1.8 per cent decline. Brent crude settled 43 US cents or 0.5 per cent ahead at US$81.51 a barrel.
Industrial metals were boosted by the improved risk appetite on equity markets. Copper caught an up-lift from a dispute at a Peruvian mine that threatens supply. Benchmark copper on the London Metal Exchange jumped 2.6 per cent to US$9,289.50 a tonne. Aluminium put on 1.6 per cent, nickel 1.1 per cent, lead 1.5 per cent and zinc 1.2 per cent. Tin eased 0.2 per cent.
Gold retreated, but movements have been narrow this week as traders await tonight’s US employment data. Gold for December delivery settled US$2.60 or 0.1 per cent lower at US$1,759.20 an ounce. The NYSE Arca Gold Bugs Index firmed 0.67 per cent.
BHP and Rio Tinto moved higher in overseas trade. BHP’s US-listed stock gained 1.34 per cent and its UK-listed stock 3.56 per cent. Rio Tinto added 1.58 per cent in the US and 3.47 per cent in the UK. With markets closed for Golden Week, the spot price for iron ore landed in China last traded at US$117.80 a tonne. Trade resumes today.
