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Positive US leads and the prospect of a bumper corporate earnings season point to fresh records as a new Australian trading week gets underway.

ASX futures climbed 30 points or 0.4 per cent after the Dow and S&P 500 rose to all-time highs. Barring surprises, the S&P/ASX 200 was set to open at a new peak.

The corporate reporting season accelerates this week with updates from Commonwealth Bank, Telstra, AMP, AGL and the major insurers.

Wall Street

US stocks finished mixed but broadly higher as the strongest jobs report in nine months dampened growth worries and fuelled advances in cyclical sectors. A surge in bond yields boosted lenders, but weighed on companies whose valuations vary with the cost of borrowing to fund growth.

The S&P 500 climbed seven points or 0.17 per cent. The Dow Jones Industrial Average gained 144 points or 0.41 per cent. The growth-stock heavy Nasdaq Composite fell 59 points or 0.4 per cent.

The unemployment rate dived to 5.4 per cent last month from 5.9 per cent in June as non-farm payrolls increased by 943,000. Both figures were stronger than expected. The consensus among economists polled by Dow Jones was for jobs growth of 845,000 and a jobless rate of 5.7 per cent.

Average hourly earnings were 0.4 per cent higher than the month before. Earnings have risen 4 per cent in a year amid a tightening labour market.

“It feels like a Goldilocks report. You have not too hot in terms of wages, but not too low in terms of job gains,” Beth Ann Bovino, chief US economist at S&P Global Ratings, told CNBC.

Financial stocks led the rally, rising 2.01 per cent as rates surged. The yield on ten-year US treasuries climbed almost eight basis points to 1.3 per cent.

“I think that investors are now saying we’ve got renewed confidence in the economic recovery,” Sam Stovall, chief investment strategist at CFRA, told Reuters. “And as a result, are rotating again into the cyclical, the value stocks, as well as the smaller-cap issues.”

Goldman Sachs rallied 3.54 per cent to an all-time high. Wells Fargo put on 3.79 per cent, Bank of America 2.9 per cent and JPMorgan Chase 2.84 per cent. The Russell 2000 index of small caps rose 0.53 per cent.

So-called stay-at-home stocks declined. Zoom Video fell 3.82 per cent, Amazon 0.92 per cent and Netflix 0.83 per cent.

Australian outlook

Fresh highs on the horizon if futures trading proves a reliable guide. The S&P/ASX 200 firmed 27 points or 0.36 per cent on Friday, thanks in large part to heavy institutional buying in the closing auction. That buying suggests optimism about this week’s corporate earnings reports.

The financial sector did the heavy lifting last week and should lead again this session as Australian yields follow their US counterparts higher. (Higher rates allow lenders to expand profit margins.)

Other sectors to shine in the US on Friday were materials +1.47 per cent, energy +0.93 per cent and industrials +0.43 per cent.  

Growth and defensive sectors eased in the US, but declines were minimal. Health dipped 0.1 per cent, tech 0.12 per cent and real estate 0.23 per cent.  

A lighter week for economic data should allow what is expected to be a bright corporate earnings season to take the spotlight. Market analysts anticipate a fierce rebound in profits from the depths of the pandemic. A flood of increased dividend payments should fuel the next up-leg in the market.

The session ahead brings updates from toll road operator Transurban, insurer Suncorp and rail freight operator Aurizon. The rest of the week looks like this: Challenger, Megaport (Tuesday); CBA, IAG, Mineral Resources (Wednesday); Telstra, AMP, AGL, Mirvac, Goodman, QBE, Downer (Thursday); and Baby Bunting and Bailador Technology (Friday). (Source: CommSec.)

Xero holds its AGM on Thursday.

The weekend’s Covid-19 news was mixed. South-east Queensland emerged from lockdown yesterday as Cairns and the Armidale region of NSW started snap lockdowns. New South Wales recorded a fresh daily high of 319 new local cases on Saturday and 262 yesterday. Victoria reported 29 cases on Saturday and 11 on Sunday.   

Highlights on the economic calendar include: job vacancies (today); monthly business sentiment, weekly consumer sentiment, building approvals (Tuesday); and monthly consumer confidence (Wednesday).

Overseas, inflation reports in China (today) and the US (Wednesday) are the most likely market-movers. 

IPOs: another light week ahead. The only companies scheduled to list are Cobram Estate Olives on Wednesday and Cannon Resources on Thursday. 

The dollar came under pressure from a firming greenback on Friday, but rebounded 0.13 per cent this morning to 73.59 US cents.

Commodities

Gold suffered its biggest fall since mid-June as surges in the US dollar and treasury yields undercut demand for alternative stores of wealth. Gold for December delivery settled US$45.80 or 2.5 per cent weaker at US$1,763.10 an ounce. The NYSE Arca Gold Bugs Index sank 2.75 per cent.

Oil added to losses from its worst week since March. Brent crude settled 59 US cents or 0.8 per cent lower at US$70.70 a barrel. The global benchmark fell 6.3 per cent last week. The US benchmark shed 7.7 per cent.

Mining heavyweights BHP and Rio Tinto steadied at the end of a losing week. Rio Tinto edged up 0.27 per cent in the US and 0.1 per cent in the UK. BHP’s UK-listed stock gained 0.09 per cent before its US-listed stock faded 0.39 per cent.

Iron ore mounted a tepid recovery from Thursday’s 7.2 per cent tumble. The spot price for ore landed in China edged up US$1.15 or 0.7 per cent to US$171.20 a tonne.

Ore prices have slumped by almost a quarter in four weeks amid signs of slowing Chinese demand and an environmental crackdown on steelmakers.

“Iron ore and steel prices have started showing signs of weakness after a long-standing rally, with iron ore falling significantly in the past month,” Fitch Solutions wrote. “Going forward, an improvement in supply and lower consumption by downstream layers will cap price gains for both,” it added.

Industrial metals were pressured by a jobs-fuelled rally in the US dollar. Benchmark copper on the London Metal Exchange fell 0.3 per cent to US$9,446 a tonne. Aluminium declined 0.6 per cent, nickel 1.4 per cent, lead 4.3 per cent, zinc 1.5 per cent and tin 0.4 per cent.

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