Australian shares were set for a cautiously positive open after strength in cyclical sectors helped lift the S&P 500 to a new high.
ASX futures edged up nine points or 0.12 per cent. The S&P/ASX 200 fell 17 points or 0.23 per cent from record levels yesterday after the Reserve Bank confirmed it would start to reduce its support for the economy next month.
Overnight, iron ore edged higher for a second day. Oil, gold and copper declined. The dollar hovered near 74 US cents.
US stocks overcame early weakness as a recovery in bond yields stoked interest in stocks leveraged to the economy. Rising Covid-19 cases kept a lid on travel stocks .
The S&P 500 rallied 36 points or 0.82 per cent to a new closing high. The Dow Jones Industrial Average gained 278 points or 0.8 per cent. The Nasdaq Composite put on 80 points or 0.55 per cent.
The energy sector, industrials, financials and materials all rose at least 1 per cent as bond yields recovered from five-month lows. The yield on ten-year US treasuries skidded on Monday after weak US and Chinese manufacturing gauges fuelled concerns about global growth as the delta variant spreads.
“Even though the pandemic is still with us in certain places where there are pockets of this and that, the broad shutdowns of economies are not going to happen. And I think it demonstrates that consumption patterns are super strong, which is the underlying factor that really keeps markets up,” Jamie Cox, managing partner at Harris Financial Group, told Reuters.
Dow heavyweights tied to the global economy, such as Boeing, Caterpillar and 3M, gained at least 1.6 per cent. A report showed US factory orders were stronger last month than expected.
Travel stocks wilted as the seven-day average of new coronavirus cases in the US passed last (northern) summer's peak. The daily average reached 72,790 on Friday, beating last year's high by roughly 4,000 cases.
Hyatt Hotels declined 2.03 per cent. Theme park operator Disney dropped 1.46 per cent. Cruise lines Norwegian and Royal Caribbean fell between 1.3 and 1.6 per cent.
Healthcare stocks strengthened with the renewed focus on infection rates. Vaccine-maker Pfizer gained 3.91 per cent, Johnson & Johnson 1.23 per cent and Moderna 11.51 per cent.
The market looks set to retest Monday's record levels after largely riding out yesterday's central bank surprise. The RBA defied calls to delay the taper of its bond-buying program, insisting the economy will quickly recover from the Greater Sydney lockdown. Stocks dipped, then mostly recovered, indicating buying interest remains robust, even near all-time highs. The ASX 200 closed just 17 points lower after falling as much as 36 points.
There were also signs of a recovery in risk appetite at the speculative end of the market. The S&P/ASX Emerging Companies Index and Small Ords both hit new peaks yesterday.
Wall Street was strong pretty much across the board. Ten of eleven sectors rallied. Only communication services missed the boat, dipping 0.2 per cent. Cyclicals did much of the heavy lifting.
Earnings reports start to trickle in today. Real estate investment trust BWP reports full-year earnings. The trust invests in and manages commercial properties, including 68 Bunnings Warehouses. Mortgage insurer Genworth reports half-year earnings.
A busy week for economic data continues with June retail sales, July construction data and vehicle sales.
The dollar bounced 0.44 per cent to 73.93 US cents.
Iron ore prices continued to stabilise after last week's Chinese environmental clampdown on steelmakers. The spot price for ore landed in China edged up 75 US cents or 0.4 per cent to US$184.15 a tonne.
BHP and Rio Tinto dragged here yesterday, but should recover this session following gains in their overseas listings. BHP's US-listed stock rose 1.68 per cent and its UK-listed stock added 0.68 per cent. Rio Tinto put on 2.39 per cent in the US and 1.05 per cent in the UK.
The US energy sector rebounded 1.83 per cent despite down-pressure on crude. Brent crude settled 48 US cents or 0.7 per cent lower at US$72.41 a barrel as traders continued to fret about the demand implications of the spread of the delta variant.
Gold faded as the US dollar and treasury yields rose. Gold for August delivery settled US$8.10 or 0.4 per cent weaker at US$1,814.10 an ounce. The NYSE Arca Gold Bugs Index climbed 1.15 per cent.
Copper extended its retreat in the wake of soft Chinese factory data over the weekend. Benchmark copper on the London Metal Exchange fell 1.6 per cent to US$9,521.50 a tonne. Aluminium declined 1.2 per cent, nickel 0.7 per cent and zinc 2.7 per cent. Tin improved 0.5 per cent. Lead was unchanged.