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A fourth straight rise on Wall Street and a rebound on commodity markets indicate a positive start to Australian trade as a global market recovery continues.

ASX futures climbed 49 points or 0.75 per cent. The S&P/ASX 200 has risen in three out of four sessions this week, adding 0.8 per cent yesterday.

Overnight, US stocks matched their longest winning run of the year with a fourth straight advance. Iron ore, oil and copper rebounded. Gold snapped its worst losing streak in more than three years.  

Wall Street

Wall Street’s main indices rallied overnight after the Federal Reserve hinted it may slow the pace of interest rate increases if growth rolls over. Energy producers and chipmakers led as crude rebounded and strong earnings from Samsung soothed concerns about chip demand.

The S&P 500 climbed 58 points or 1.5 per cent. The broadest of the three major benchmarks has advanced every session since the start of July, matching its best run of the year back in March. This week’s rally has lifted the index out of bear market territory.

“There’s not necessarily much conviction in this move, but it is nice to see that, in the absence of new negative news, that markets are bouncing off of short-term oversold levels,” Angelo Kourkafas, investment strategist at Edward Jones, told CNBC.

The Dow Jones Industrial Average climbed 347 points or 1.12 per cent. The Nasdaq Composite put on 259 points or 2.28 per cent.

US stocks jumped on Wednesday night after the minutes from the latest Federal Reserve meeting showed the central bank may increase the federal funds rate by a smaller-than-expected 50 basis points this month. Overnight, traders added growth stocks that bore the brunt of this year’s rates-related selling.

Changes in Fed funds futures in the last 36 hours indicated expectations for this year’s peak in rates have come down from around 4 per cent to 3.44 per cent. In other words, markets are pricing in a shallower rates cycle than they were a few days ago.

Overnight, Fed Governor Christopher Waller said a strong labour market would protect the economy from falling into recession.

“I personally think some of the fears of a recession are overblown,” Waller said.

“We’re going to get inflation down. That means we are going to be aggressive on rate hikes and we may have to take the risk of causing some economic damage, but I don’t think, given how strong the labour market is right now, that that should be that much,” he added.

The energy sector jumped 3.51 per cent as US crude bounced straight back out of a bear market. On Wednesday a two-day rout pulled West Texas Intermediate briefly down more than 20 per cent from its peak. Oil prices bounced more than 4 per cent overnight (more below).

Chip stocks soared after South Korean giant Samsung announced its strongest second-quarter profit since 2018. Profits jumped 11 per cent from a year earlier.

US rivals rallied as the strong result dampened worries about falling demand after customers stocked up during the pandemic to service people working from home. Nvidia jumped 4.81 per cent. AMD gained 5.24 per cent.

Australian outlook

A promising week keeps getting better. If the market holds its gains, the S&P/ASX 200 is on track for its second weekly advance in three weeks as this year’s rate-hike panic continues to settle.

The Australian benchmark looks to have put in a “higher low” at the end of the last week. A “higher high” above 6760 in the next few sessions would suggest a trend reversal after the June market plunge.

The reaction to tonight’s monthly US jobs report will have some say in whether that happens next week. The S&P 500 is on a four-session winning run and has not put together five straight advances all year.

The dollar recovered from a two-year low overnight as the US dollar index backed off its highest level in almost two decades. The Aussie firmed 0.83 per cent to 68.38 US cents.

There was plenty to like in the overnight action in the US. Energy and ‘Big Tech’ led, booking sector gains of between 2 and 3.5 per cent.

The financial sector put on 1.46 per cent. Industrials added 1.19 per cent. Materials bounced 0.92 per cent as commodity markets recovered.

Bond proxies dragged as treasury yields rallied. Utilities was the only sector to finish lower, by less than 0.1 per cent. Real estate and consumer staples gained less than 0.1 per cent.

IPOs: gold explorer Regener8 Resources lists at 12pm AEST. Regenerg8 intends to investigate unexplored tenements in the Kookynie district of WA. Neighbours include Genesis Minerals, Iris Metals, Carnavale Resources and Metallicity.

Commodities

Oil trimmed two days of heavy falls as recession fears temporarily receded. Brent crude bounced US$3.96 or 3.9 per cent, settling at US$104.65 a barrel.

West Texas Intermediate rose US$4.20 or 4.3 per cent to US$102.73. The US benchmark briefly entered a bear market on Wednesday as a drop to US$98.53 extended its decline from its settlement peak beyond 20 per cent.

Iron ore recovered some of this week’s losses, which were triggered by fears of renewed lockdowns as China battled a Covid outbreak. The spot price for ore landed in China bounced US$1.85 or 1.6 per cent to US$114.18 a tonne. The most-traded ore contract on the Dalian Commodity Exchange rallied 3.9 per cent to 756.5 yuan.

BHP‘s US-traded depositary receipts firmed 3.12 per cent after its UK listing gained 3.88 per cent. Rio Tinto recouped 3.89 per cent in the US and 3.68 per cent in the UK. Both companies fell heavily earlier this week.

Gold snapped its longest losing run since 2018. Metal for August delivery settled US$3.20 or 0.2 per cent ahead at US$1,739.70 an ounce. The NYSE Arca Gold Bugs Index edged up 1.15 per cent.

Precious metal prices have tumbled this week as a rampant US dollar crushed demand for hedges. On Wednesday gold closed at its lowest level since September.  

Copper and several other industrial metals rebounded strongly on the London Metal Exchange after China announced fresh support for the economy. Benchmark LME copper surged 4.2 per cent to US$7,818.50 a tonne.

Tin jumped 5.3 per cent, zinc 4.4 per cent and aluminium 1.7 per cent. Nickel eased 1.4 per cent. Lead shed 0.4 per cent.

“We are seeing something of a softening trend in the U.S. dollar index and a bit of short-covering after a broad-based sell-off in commodities,” Kunal Shah, head of research at Nirmal Bang Commodities, told Reuters.

“Overall, the sentiment is still bearish because global growth is faltering. There are supply disruptions, but demand destruction is far bigger than the supply concerns, hence we are going to see further downside.”

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