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The share market is pointing higher after a record jump in retail sales and the prospect of more stimulus spending lifted Wall Street to a third straight gain.

ASX SPI200 index futures rallied 29 points or 0.5 per cent to 5974. The S&P/ASX 200 has a second day of gains in its sights after rebounding 223 points or 3.9 per cent yesterday to break a three-session losing run.

The mood on Wall Street was exuberant after investors were served a cocktail of good news about the economy, stimulus efforts and treatments for COVID-19. The S&P 500 climbed 58 points or 1.9 per cents as the repairwork from last week’s heavy sell-off continued. The Dow put on 527 points or 2.04 per cent. The Nasdaq added 170 points or 1.75 per cent to move within 1 per cent of its all-time high.

Retail sales surged 17.7 per cent last month as stores reopened, according to government figures. The rebound was the biggest on record and twice the increase anticipated by economists. The revival reversed much of the damage done during March and April when sales declined by 8.2 per cent and 14.7 per cent, respectively.

Construction companies were boosted by a Bloomberg report on White House plans to spend US$1 trillion on infrastructure to create jobs and stimulate the economy. The report said the cash would go towards roads, bridges and communication infrastructure. Shares in machinery manufacturer Caterpillar jumped 5.3 per cent.

Federal Reserve Chair Jerome Powell told Congress more fiscal spending would probably be needed to lift the economy out of recession. Stocks fell back from session highs after Powell indicated the central bank would slow or even stop its corporate bond buying once the bond market was functioning better.  

“I don’t see us as wanting to run through the bond market like an elephant,” he said in testimony before Congress. “We want to be there if things turn bad in the economy.”

Sentiment was also boosted by news of a breakthrough in treating COVID-19. A UK trial showed a cheap generic steroid called dexamethasone reduced death rates in patients with severe infections by roughly a third. The researchers said the drug should become standard care in hospitals.

Airline stocks, cruiselines and other businesses that benefit from reopening the economy rallied. All 11 sectors advanced, led by energy +2.8 per cent, health +2.4 per cent and technology +2.2 per cent.

The materials sector climbed 2.1 per cent as raw commodities rose on the prospect of increased US infrastructure spending. BHP’s US-listed stock tacked on 1.42 per cent and its UK-listed stock 2.19 per cent. Rio Tinto gained 0.63 per cent in the US and 2.24 per cent in the UK. The spot price for iron ore landed in China rose $2 or 1.9 per cent to US$105.45 a dry ton.

Copper moved back towards last week’s five-month peak. Benchmark copper on the London Metal Exchange closed 0.3 per cent ahead at US$5,698.50 a tonne. Aluminium added 1.5 per cent, nickel 2.3 per cent, lead 1.3 per cent and zinc 0.6 per cent. Tin dropped 0.5 per cent.

Oil rallied more than 3 per cent after the International Energy Agency (IEA) forecast the biggest demand rebound in history next year. Brent crude settled $1.24 or 3.1 per cent higher at US$40.96 a barrel. The IEA said it expects demand to fall by 8.1 million barrels a day this year, then increase by 5.7 million barrels a day in 2021, “the largest one-year jump ever recorded”.

Gold ticked higher amid rising tensions on the Korean peninsula and as Fed Chair Powell downplayed recent signs the US economy is roaring out of recession. Gold for August delivery settled $9.30 or 0.5 per cent ahead at US$1,736.50 an ounce.

The dollar was steady this morning at 68.84 US cents.

Wall Street has housing starts and building permit data scheduled for tonight, as well as further testimony from Fed Chair Powell.  

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