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Shares look set for their highest open in a week as gains on Wall Street strengthen hopes that the worst of the Nasdaq-led US market correction is behind.
Australian index futures climbed 44 points or 0.75 per cent, indicating optimism about the session ahead after yesterday’s lacklustre 0.1 per cent loss.
BHP and Rio Tinto rose in overseas trade despite setbacks for iron ore and most base metals. Oil and gold rose. The dollar ticked back above 73 US cents.
Wall Street
A second day of strong gains for the battered tech megacaps fired the Nasdaq Composite to a final tally of 134 points or 1.21 per cent. Tesla put on 7.2 per cent, Netflix 4.1 per cent, Facebook 2.4 per cent, Amazon and Alphabet 1.7 per cent and Microsoft 1.6 per cent.
“The market is doing its best to prove that buying the dip still is in vogue,” Frank Cappelleri, executive director at Instinet, told CNBC.
The S&P 500 gained 18 points or 0.52 per cent, with the communication services, REITs and consumer discretionary sectors all adding at least 1 per cent. The Dow Jones Industrial Average was hamstrung by declines in industrial heavyweights Caterpillar and Boeing and financial powerhouse Goldman Sachs and JPMorgan Chase, closing with a meagre gain of two points or 0.01 per cent.
The market mood was helped by upbeat US and Chinese economic data ahead of tonight’s policy statement from the Federal Reserve. The Empire State Manufacturing Index rose to 17 this month from 3.7 last month, twice the gain expected by economists. A report yesterday showed China’s industrial production accelerated last month at the strongest pace in eight months.
Australian outlook
Local investors appeared to sit on their hands yesterday while they awaited more evidence the technical correction in US Big Tech had run its course. The signs this morning appear favourable, with the S&P 500 closing at its highest level since the second day of the tech plunge and the Nasdaq rising for a second session.
“The pullback we had is now behind us,” Peter Cardillo, chief market economist at Spartan Capital Securities, told Reuters.
The S&P/ASX 200 fell five points or 0.1 per cent yesterday as declines in the big banks and energy stocks offset gains in most of the miners and the much of the broader market. Financials missed the upswing in the US overnight, falling 1.4 per cent, a potentially ominous sign for our banks today.
Gold stocks have enjoyed a stellar week, but may have got ahead of themselves, according to ThinkMarkets Market Analyst Carl Capolingua.
“Some of the gains from yesterday and today [Tuesday] are really impressive. For example, Northern Star and Perseus are each up over 10 per cent across the two sessions, and even Newcrest is up around 5 per cent,” he said. “One can’t help but think that gold stocks have probably run ahead of the gold price though. So, if the gold price can’t hang on to this new found momentum, gold stocks are going to struggle to hang onto these gains.”
Overnight, gold inched up $2.50 or 0.1 per cent to US$1,966.20 an ounce, its highest close in two weeks. The NYSE Arca Gold Bugs Index closed flat.
Commodities
Oil was boosted by the second shutdown of the US hurricane season at refineries and producers around the Gulf of Mexico. Brent crude settled 92 cents or 2.3 per cent higher at US$40.53 a barrel as Hurricane Sally shut down around a quarter of offshore production and several refineries.
Declines in iron ore and several industrial metals had minimal impact on BHP and Rio Tinto. BHP’s US-listed stock added 0.98 per cent and its UK-listed stock 1.85 per cent. Rio Tinto bounced 2.46 per cent in the US and 2.7 per cent in the UK.
The spot price for iron ore landed in China fell $1.95 or 1.5 per cent to US$128.55 a dry ton. Benchmark copper on the London Metal Exchange eased 0.5 per cent to US$6,777.75 a tonne. Aluminium shed 0.7 per cent, nickel 0.5 per cent and lead 1 per cent. Zinc improved 0.7 per cent and tin 0.3 per cent.
The dollar climbed 0.29 per cent to 73.04 US cents.
