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Tepid gains on Wall Street point to a cautiously positive start to Australian trade after US lawmakers talked up progress towards a new coronavirus relief package.
ASX SPI200 index futures climbed 10 points or less than 0.2 per cent, signalling an early rebound following yesterday’s 0.7 per cent slump on the S&P/ASX 200.
Wall Street
US stocks climbed after Democrat House Speaker Nancy Pelosi emphasised progress in stimulus talks with the White House while backing off from this morning’s self-proclaimed deadline for a deal. The leader of the opposition negotiating team was due to talk again to Treasury Secretary Steven Mnuchin and said she would keep talks going regardless of whether a deal emerged today.
“It isn’t that this day was a day that we would have a deal, it was a day that we would have our terms on the table to be able to go to the next step,” Pelosi said.
The S&P 500 finished well off its session high with a gain of 16 points or 0.47 per cent. The Dow Jones Industrial Average added 113 points or 0.4 per cent after being up more than 300 points. The Nasdaq Composite gained 38 points or 0.33 per cent.
The two sides of the US political divide have narrowed their differences in recent talks, with the White House raising its offer towards US$1.9 trillion, nearer the US$2.2 trillion price tag for legislation passed by House Democrats earlier this month. Meanwhile, Senate Republicans were preparing to vote on a narrower US$500 billion bill.
“The prospects for an actual deal still remain minuscule as the Republicans in the Senate vehemently oppose the size of the stimulus discussed, but hope runs eternal in the markets and investors continue to remain optimistic that if some sort of deal is reached between the White House and the House of Representatives then the momentum and pressure from Trump will force the Senate to cave and approve the package,” Boris Schlossberg, managing director for FX at BK Asset Management, said.
Travel and tourism stocks were lifted by news an experimental Covid-19 vaccine could be available for emergency use as soon as December if the drug passes clinical trials next month. Moderna CEO Stephane Bancel said the federal government could fast-track the use of its vaccine candidate if successful.
The S&P 1500 airlines sub-industry index climbed 1.2 per cent. Cruise company Carnival put on 3.3 per cent, hotel group Hyatt 2.7 per cent and a casinos and gaming index 3.1 per cent.
Australian outlook
The ASX’s two-week surge from the start of the month has lost momentum in recent sessions as the S&P/ASX 200 butts up against strong technical resistance around the 6200 level. The benchmark index fell yesterday for the third time in five sessions, losing its grip on a seven-month high and once again relinquishing its hold on the 6200 level.
Sellers emerged after the minutes from this month’s Reserve Bank policy meeting did little to clarify the prospects for a cut to the cash rate next month.
“It looked like we were going to continue the recent trend of shaking off negative overseas leads to book another up-day. But… the RBA minutes were released, and we sold off. It was a slow, painful trudge lower from there,” ThinkMarkets Market Analyst Carl Capolingua said. “I’m not sure why. Perhaps it was because there wasn’t any smoking gun in the minutes to suggest a Cup Day cut is a lock.”
The US rally, while slight, was broad enough to lift every sector except consumer staples (-0.1 per cent). Energy and financials were the pick, with gains of 1.1 and 0.8 per cent, respectively. Travel and tourism stocks were boosted by the tantalising prospect of a vaccine in a matter of weeks.
The dollar remained stuck in a trading band just below 71 US cents, lately down 0.02 per cent at 70.53 US cents.
Commodities
Copper rose to a two-year high in the US after September imports into China were the second strongest on record. Copper for December delivery settled six cents or 2 per cent ahead at US$3.148 a pound on Comex, its highest finish since June 2018.
“Strong industrial and construction activity continued to drive primary copper demand,” ANZ said in a note quoted on Reuters. “China’s plan to build strategic reserves is likely to keep imports resilient as well.”
Benchmark copper on the London Metal Exchange jumped 1.8 per cent to US$6,879 a tonne. Nickel gained 2.2 per cent, lead 0.6 per cent, zinc 1.5 per cent and tin 0.1 per cent. Aluminium shed 1 per cent.
Buying interest in iron ore miners BHP and Rio Tinto picked up when the 24-hour trading cycle reached the US. BHP’s US-listed stock gained 1.19 per cent after its UK-listed stock dipped 0.04 per cent and its Australian stock 1.64 per cent yesterday. Rio Tinto gained 0.69 per cent in the US after falling 0.37 per cent in the UK and 1.5 per cent in Australia. The spot price for iron ore landed in China improved 10 cents or 0.1 per cent to US$119.50 a tonne.
Oil logged its first advance in four sessions ahead of a weekly update on US inventories. Brent crude settled 54 cents or 1.3 per cent ahead at US$43.16 a barrel.
US goldminers inched higher as the precious metal notched a second straight gain. The NYSE Arca Gold Bugs Index finished 0.4 per cent ahead. Gold for December delivery settled $3.70 or 0.2 per cent higher at US$1,915.40 an ounce.
