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Australian stocks were poised to open higher following gains on Wall Street as strong retail sales showed rising prices have yet to impact consumer spending.  

ASX futures rallied 19 points or 0.26 per cent. The S&P/ASX 200 declined 50 points or 0.67 per cent yesterday after a report showed Australians were less optimistic about the future as the cost of living increased.

Overnight, the dollar fell below 73 US cents. Iron ore crept higher. Gold retreated from a five-month high. Energy markets were mixed.

Wall Street

US stocks pushed back towards last week’s record highs following upbeat trading updates from Home Depot and Walmart, and strong October retail sales.  

The S&P 500 climbed 18 points or 0.39 per cent to within 1 per cent of its former high. The Dow Jones Industrial Average gained 55 points or 0.15 per cent. The Nasdaq Composite added 120 points or 0.76 per cent.

A jump in retail sales last month soothed concerns that inflationary pressures might deter the main driver of the US economy, the consumer. Sales increased by 1.7 per cent as Americans appeared to start their Christmas shopping early.

The increase was the largest since March and ahead of the 1.4 per cent improvement predicted by economists polled by Dow Jones. Sales increased for a third straight month, building on a 0.8 per cent rise in September. The result was also 21,4 per cent higher than pre-pandemic levels.

“Despite soaring prices and deteriorating consumer sentiment, there is absolutely no evidence of consumers pulling back,” investment bank Jefferies told clients.

Consumer stocks flew higher as both Home Depot and Walmart beat analysts’ expectations. Home Depot jumped 5.73 per cent on signs sales this quarter were tracking ahead of last quarter, signalling a strong end to the year. Walmart declined 2.55 per cent as evidence of costs absorption and margin pressure took the shine off better-than-expected Q3 revenue and profit.

“With the robust retail sales read and solid start to retail earnings, it’s crystal clear that inflation isn’t standing in the way of consumers,” E-Trade’s managing director of investment strategy, Mike Loewengart, said. “Despite some hiccups on the labor market and inflation fronts, this could serve as the vote of confidence investors needed signaling that the economy is still chugging along nicely.”

Nike put on 1.76 per cent. Target and Lowe’s rose ahead of reporting Q3 earnings after this morning’s closing bell.

October industrial production figures were also stronger than expected, increasing a seasonally-adjusted 1.6 per cent – twice the consensus among economists.

President Joe Biden said he would make a decision on who would lead the Federal Reserve in “about four days”. Fed Governor Lael Brainard has emerged as a challenger in recent weeks to sitting Chair Jerome Powell.

Australian outlook

A broadly supportive set of leads for the day ahead. Positives: Wall Street up, dollar down, iron ore higher. Negatives: BHP and Rio Tinto down in overseas trade, copper and gold down, US financials and materials down, nasty late fade on the Dow and S&P 500.

Unsurprisingly, consumer discretionary was the pick of the US sectors overnight, surging 1.38 per cent in anticipation of a strong holiday shopping season. Retailers here may benefit from some of that optimism.

Tech was the night’s other standout, rising 1.07 per cent despite an up-tick in US yields. The two sectors with the biggest weighting on the ASX – financials and materials – declined 0.17 and 0.32 per cent, respectively.

Bond proxies also dragged. Real estate, consumer staples and utilities all shed at least 0.5 per cent.

Quarterly wages data are due at 11.30 am AEDT. A strong result would advance the argument for higher rates.

A big week of annual general meetings warms up today with meetings for shareholders in Afterpay, Seek, Seven Group, Cromwell Property, A2 Milk, Platinum Asset Management, Praemium and Liberty Financial Group.

Commonwealth Bank, Nufarm, United Malt and ALS were scheduled to issue trading updates.

IPOs: the ASX has three companies slated to list today: Lycaon Resources and Kalgoorlie Gold Mining at 12.30 pm AEDT; and My Rewards International at 2 pm. Lycaon is an explorer with three gold/nickel-copper projects in WA. Kalgoorlie Gold is a spin-off of Ardea’s Kalgoorlie assets. My Rewards offers loyalty programs to businesses for employees and customers.

The dollar dropped 0.67 per cent to 72.96 US cents as the greenback responded to strength in consumer spending.

Commodities

Iron ore edged back above US$90 a tonne following a decline in imports. Arrivals of imported ore in China fell around five per cent last week from the week before, according to SMM data. Imports were almost ten per cent lower than the same period last year.

The spot price for ore landed at Tianjin bounced US$1.25 or 1.4 per cent to US$90.40 a tonne. BHP‘s US-listed stock shed 1.86 per cent and its UK-listed stock 1.28 per cent. Rio Tinto lost 1.73 per cent in the US and 1.34 per cent in the UK.

Gold touched a five-month high before fading as the greenback strengthened. Metal for December delivery settled US$12.50 or 0.7 per cent lower at US$1,854.10 an ounce. The NYSE Arca Gold Bugs Index dipped 1.45 per cent.

Oil finished mixed as traders waited to see if the White House will release strategic reserves to rein in soaring prices. Brent crude settled 38 US cents or 0.5 per cent higher at US$82.43 a barrel. The US benchmark eased 12 cents or 0.2 per cent to US$80.76.

Copper wilted as the US dollar firmed. December copper fell 1.1 per cent to US$4.352 a pound on Comex.

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