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This week’s powerful ASX rally looks set to resume after US stocks smashed through critical technical levels amid optimism about reopening the economy.

ASX SPI200 index futures climbed 50 points or 0.9 per cent, indicating a positive start after yesterday’s five-point market setback. The S&P/ASX 200 has risen 278 points or 5 per cent this week as the lagging banking sector played catch-up with the broader market.

US stocks continued to climb the wall of worry, ignoring tensions with China and downbeat economic data. The S&P 500 rose 44 points or 1.48 per cent to close above 3,000 for the first time since March. Importantly for technical traders, the index finished above its 200-day moving average at the second attempt this week, a bullish signal for further gains.  

The Dow put on more than 500 points for a second straight session, adding 553 points or 2.21 per cent to Tuesday night’s 530-point tally. The advance lifted the blue-chip average above the 25,000 level for the first time since March. The Nasdaq trailled with a gain of 72 points or 0.77 per cent.

The big tech stocks that fuelled the early stages of the two-month market recovery underperformed as traders continued to rotate out of ‘stay-at-home’ stocks into sectors more exposed to an economic recovery. Amazon, Facebook, Twitter and Alphabet all fell.

“This is a rotation that we should get used to,” Art Hogan, chief market strategist at National Securities in the US, told CNBC. “It’s certainly much better to have this rally broaden out.”

As in Australia, the financial sector provided most of the momentum, surging 4.3 per cent in expectation that the economy will pick up as the pandemic passes. CNBC reported that lockdown restrictions in all 50 US states have been eased to some extent. Dow components Goldman Sachs and JPMorgan Chase put on 6.9 per cent and 5.8 per cent, respectively. Citigroup rose 8.5 per cent.

The White House’s feud with China continued to simmer. Secretary of State Mike Pompeo told Congress that Hong Kong was no longer autonomous from China, a step towards revoking special conditions for Hong Kong that were retained two decades ago when Britain handed over the territory to China. Hong Kong’s status as a regional financial hub has been strengthened by its independence from US tariffs imposed on mainland China.  

The Federal Reserve’s “Beige Book” showed economic activity continued to decline this month and most businesses were pessimistic about a strong recovery. Leisure and hospitality businesses were hit particularly hard.

Australian miners were well supported overseas despite losses in local trade yesterday. BHP’s US-listed stock gained 0.61 per cent and its UK-listed stock 1.52 per cent. Rio Tinto added 1.71 per cent in the US and 1.9 per cent in the UK. The spot price for iron ore landed in China edged up 50 cents or 0.5 per cent to US$95.10 a dry ton.

Oil tumbled following reports Russia wants to increase production as soon as July. Major producers agreed to caps earlier this year to cushion prices from a collapse in demand as the pandemic took hold. Brent crude settled $1.43 or almost 4 per cent lower at US$34.74 a barrel. The US benchmark shed 4.5 per cent.

Gold ended little changed as the White House’s move towards ending special treatment for Hong Kong triggered a bounce from early weakness. Gold for August delivery settled $1.40 or less than 0.1 per cent weaker at US$1,726.80 an ounce after trading as low as US$1,701.60.

Appetite for industrial metals was undermined by Sino-US tensions. Benchmark copper on the London Metal Exchange slid 1.9 per cent to US$5,226.75 a tonne. Nickel shed 1.9 per cent, lead 3 per cent, zinc 3.2 per cent and tin 0.8 per cent. Aluminium put on 0.4 per cent.

The dollar edged up 0.03 per cent to 66.22 US cents.

The day ahead brings a report on first-quarter private capital expenditure data. A big night for US data brings preliminary GDP data, durable goods orders, unemployment benefit claims and house sales.  

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