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A fourth night of gains on Wall Street and advances in key commodities point to a positive end to a strong week for Australian shares.

ASX futures bounced 69 points or 1 per cent as a week-long “risk on” rally in the US continued. The rebound positions the local market for a shot at a new 11-month high.

Iron ore jumped $6. Oil hit a 12-month peak. Gold and silver suffered sharp losses as the US dollar and bond yields rallied. The Australian dollar dipped below 76 US cents.

Wall Street

Bright corporate earnings, improving economic data and progress towards coronavirus relief measures provided a platform for a fourth straight US advance. The S&P 500 rose 42 points or 1.09 per cent to a record close. The Dow Jones Industrial Average added 332 points or 1.08 per cent. The Nasdaq Composite put on 167 points or 1.23 per cent.

A third straight weekly decline in jobless claims underlined improvements in the labour market. First-time claims for benefits dropped by 33,000 to 779,000, well below expectations for a reading around 830,000. The report sharpened optimism ahead of tonight’s January employment update.

Well-received quarterlies from PayPal and eBay continued an earnings season that appears to have settled valuation doubts. Analysts now predict a majority of companies will return to earnings growth by next quarter, a reversal of earlier gloomy expectations.

“We believe that we are still in the early stages of a new bull market, transitioning from the ‘hope’ phase to a longer ‘growth’ phase as strong profit growth emerges,” Goldman Sachs chief global equity strategist Peter Oppenheimer wrote.

Cyclical sectors were back in vogue as President Joe Biden’s U$1.9 trillion relief package moved towards a vote in the Senate. The package includes stimulus cheques and measures to speed up the rollout of vaccines.

“Vaccine deployments are accelerating and earnings are coming in much better than expected. While there’s still a lot of uncertainty out there, those more positive themes are probably reassuring investors,” Matt Stucky, portfolio manager at Northwestern Mutual Wealth Management, told Reuters.

Speculative bubbles in chatroom favourites GameStop and AMC Entertainment continued to deflate. GameStop slumped 42.3 per cent. AMC lost 21 per cent.

Australian outlook

The clouds have cleared this week for a run to higher levels. Last week’s US ructions are firmly in the rear-view mirror after stock fundamentals reasserted themselves. Those who “bought the dip” have been well rewarded.

The S&P/ASX 200 should regain most, if not all, of yesterday’s loss this session. The index slipped 59 points or 0.87 per cent yesterday as declining US futures offered local investors a bum steer. Profit warnings from energy giants Origin and AGL also cast a shadow.

A strong rise in the US dollar and gains in bond yields boosted the US financial sector, but weighed on mining stocks. US financials climbed 2.3 per cent, tech stocks 1.6 per cent and industrials 1.1 per cent. The materials sector dropped 0.6 per cent. The Australian dollar was last down 0.44 per cent to 76.01 US cents after trading below 76 US cents.

The first week of the half-year reporting season wraps up with a report today from REA Group. Next week brings the first of the heavyweights, including CBA, Newcrest, IAG, Telstra and AMP.

RBA Governor Philip Lowe testifies today before the House economics committee in Canberra. The central bank releases a quarterly Monetary Policy Statement at 11.30 am AEDT. Monthly updates on retail sales and services industry activity are also due this session.

Commodities

Gold and silver were the biggest victims of last night’s “risk on” market tone. Signs of improvement in the US economy boosted the greenback and bond yields, crushing demand for alternative stores of wealth.

Gold for April delivery tumbled $43.90 or 2.4 per cent to settle at US$1,791.20 an ounce. March silver skidded 65 cents or 2.4 per cent to US$26.234.

Oil rose for a fourth straight session to its strongest close in a year. Brent crude settled 38 cents or 0.7 per cent ahead at US$58.84 a barrel after briefly trading above US$59. Sentiment this week has been lifted by Saudi production cuts and declines in US stockpiles.

A sharp rebound in iron ore did not translate into buying interest in BHP and Rio Tinto during a soft night for US-listed miners. BHP’s US-listed stock eased 0.07 per cent and its UK-listed stock 0.17 per cent. Rio Tinto lost 0.01 per cent in the US after gaining 0.2 per cent in the UK. The spot price for iron ore landed in China rallied $6 or 3.9 per cent to US$158.05 a tonne.

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