Stocks are aiming higher after Wall Street put economic recovery before civil unrest, rising firmly late in the session.
ASX SPI200 index futures climbed 31 points or 0.5 per cent, positioning the Australian market for a possible third day of gains. The benchmark S&P/ASX 200 index rose 16 points or 0.3 per cent yesterday after the Reserve Bank left the cash rate at a record-low 0.25 per cent and promised to keep it there until employment and inflation move towards target levels.
US stocks accelerated gains into the close as traders looked beyond social protests to a burgeoning economic revival as lockdown restrictions are lifted. The S&P 500 closed 25 points or 0.82 per cent ahead, with much of the gains coming in the last half-hour. The Dow added 268 points or 1.05 per cent. The Nasdaq put on 56 points or 0.59 per cent.
“Technicals are pushing the market higher,” Peter Cardillo, chief market economist at Spartan Capital Securities in the US, told Reuters. “The market’s not paying attention to the potential problems that the protests could have on local economies.”
Violent demonstrations over the death of George Floyd continued even as President Donald Trump threatened to put the army on the streets. “If a city or state refuses to take the actions necessary to defend the life and property of their residents, then I will deploy the United States military and quickly solve the problem for them,” Trump told reporters. Curfews were set to continue in 40 US cities on Tuesday night.
The market’s remarkable rebound off the March pandemic lows has continued in the face of scepticism about the pace of economic recovery, rising Sino-US tensions and the recent civil unrest. Last night’s gains brought the Nasdaq within 2 per cent of its all-time high. The S&P 500 has bounced more than 40 per cent from its March low to within 9 per cent of a record. Market sentiment was boosted overnight by a report that state-run Chinese companies bought 180,000 tonnes of US soybeans on Monday despite a reported state-ordered halt on buying US produce.
While so-called stay-at-home stocks such as Amazon and Facebook led the initial recovery, the latest up-leg has been driven by stocks that will benefit from a return to normal economic life. Retailer Gap climbed 7.7 per cent, Southwest Airlines 2.6 per cent, MGM Resorts 2.3 per cent, Hyatt Hotels 2.1 per cent and United Airlines 1.5 per cent.
“This is a healthy reversion as you’re seeing some of the laggards come back in line,” Jeff Kilburg, CEO of KKM Financial, told CNBC. “If anything, this is going to help sustain a more bullish stance in the marketplace.”
All 11 sectors advanced, led by energy +2.7 per cent, materials +1.8 per cent and industrials +1.3 per cent. Defensive sectors brought up the rear.
Mining stocks rose as copper and oil hit their highest levels in almost three months and iron ore moved further above US$100 a dry ton. BHP’s US-listed stock gained 3.15 per cent and its UK-listed stock 4.06 per cent. Rio Tinto added 1.6 per cent in the US and 1.51 per cent in the UK.
Oil rose ahead of a conference call tomorrow when the Organization of the Petroleum Exporting Countries and its allies are expected to extend existing production caps. Brent crude settled $1.25 or 3.3 per cent higher at US$39.57 a barrel.
The spot price for iron ore landed in China rose $1.25 or 1.2 per cent to US$101.75 a dry ton. Benchmark copper on the London Metal Exchange finished 0.9 per cent ahead at US$5,506.75 a tonne after earlier reaching its highest level since March 13. Aluminium put on 0.7 per cent, nickel 1.8 per cent, lead 2.5 per cent and tin 2.2 per cent. Zinc dipped 0.4 per cent.
Gold eased for a second day as a strong stock market dulled interest in havens. Gold for August delivery settled $16.30 or 0.9 per cent lower at US$1,734 an ounce.
The dollar eased 0.04 per cent this morning to 68.91 US cents.
Another busy session ahead for domestic economic data: the performance of construction index at 8.30 am EST is followed by quarterly GDP figures and monthly building approvals at 11.30 am. Chinese services data are due 15 minutes later. Wall Street has May payrolls data scheduled tonight, as well as crude oil inventories, factory orders and a report on services activity.