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Australian shares were poised to play catch-up after the Dow rose for a fifth night as upbeat earnings soothed doubts about consumer spending.

A strong session put Wall Street’s main indices firmly on track to break their longest weekly losing runs in decades.

ASX futures rallied 69 points or 0.97 per cent after the Dow jumped more than 500 points. The S&P 500 gained 2 per cent and the Nasdaq Composite almost 2.7 per cent.

The US rally helped offset pressure on iron ore and base metals as China’s economy continues to cool. Oil jumped 3 per cent. Gold was little changed.

Wall Street

Strong trading updates from Macy’s, Dollar Tree and Dollar General fuelled a relief rally in beaten-down retail stocks amid a suspicion concerns about consumer spending were overblown. Tech stocks surged on takeover action and a positive reaction to earnings from chipmaker Nvidia.

The S&P 500 climbed 79 points or 1.99 per cent. The broadest of the three major benchmarks has gained 4 per cent this week and is on track to end a run of seven straight weekly declines, its worst run since the dotcom collapse.

The Dow Jones Industrial Average gained 517 points or 1.61 per cent. The rally extended the blue-chip average’s tally for the week to 4.4 per cent. The average has fallen for eight weeks, its longest streak since 1932.

The Nasdaq Composite surged 306 points or 2.68 per cent. The tech index is ahead 3.4 per cent for the week and on track to break a seven-week run of losses.

“Last week’s doom and gloom about the all-important U.S. consumer may have been overdone, along with the dire recession headlines,” Quincy Krosby, chief equity strategist for LPL Financial, said.

The “notion that the consumer, 70 percent of the U.S. economy, is on a spending strike, is overblown as earnings reports coupled with positive guidance indicate otherwise,” she added.

Department store Macy’s flew up 19.31 per cent after raising its profit forecast. Discount retailers Dollar Tree and Dollar General put on 21.87 per cent and 13.71 per cent, respectively. Both companies beat analysts’ earnings expectations.

Big Tech roared higher after Nvidia reported better-than-expected Q1 results and Broadcom launched a takeover of cloud computing firm VMware. Nvidia overcame early weakness to advance 5.16 per cent following a mixed Q1 trading update.

Facebook owner Meta Platforms bounced 4.24 per cent, Amazon 4.03 per cent and Apple 2.32 per cent.

Stocks rose yesterday after the Federal Reserve indicated it intended to hike interest rates hard and fast over the next few months, creating the possibility of a pause in the final third of the year. Markets expect increases of 50 basis points at the next three meetings.

“With first quarter earnings essentially over and coming in better than expected, combined with the Fed indicating that they are going to be front-end loading its rate-tightening policy and implying it may pause later in the fall, all of that has given investors reason to feel optimistic,” Sam Stovall, chief investment strategist at CFRA Research, said.

Australian outlook

The China worries that sank the S&P/ASX 200 yesterday made little or no impression on the inward-looking US overnight. Wall Street surged as updates from retailers suggested all was not doom and gloom on the American high street. Shoppers were still shopping. Some businesses were managing rising costs better than others.

Strong gains in the US have set up the Australian market for a catch-up session. The ASX 200 slumped around 0.7 per cent yesterday amid on-going worries about the rapidly-slowing Chinese economy. Comments from China’s premier suggested growth might even contract this quarter as lockdowns restrict business activity.

The market looks set to reverse yesterday’s loss, plus some more. The index may even re-test the 7200 level.  

Retailers took a beating here yesterday but should recover this session. The US consumer discretionary sector led with a rise of 4.78 per cent. Consumer staples gained a more restrained 1.13 per cent.

Tech was the night’s other standout sector, rising 2.45 per cent. Financials gained 2.25 per cent, industrials 1.99 per cent and materials 1.82 per cent. Real estate was the only sector to miss the bus, falling 0.1 per cent.

The Australian Bureau of Statistics releases monthly retail sales data at 11.30 am AEST.

Data sourcing firm Appen is due to hold its annual general meeting today. Shareholders will likely demand further information after potential suitor Telus withdrew its takeover offer late yesterday. Appen said the Canadian firm offered no reasons for the abrupt change of heart.

IPOs: the listing of Oceana Lithium originally pencilled for today has been postponed. A new date has yet to be confirmed.

The dollar firmed 0.15 per cent to 70.99 US cents.

Commodities

Oil rallied with the “risk on” mood in the US after data showed declines in US crude and gasoline stockpiles. Brent crude settled US$3.37 or 3 per cent higher at US$117.40 a barrel.

Iron ore and base metals faced selling pressure as Chinese demand continued to be suppressed by Covid restrictions. Premier Li Keqiang said the challenges facing the economy this quarter were greater than during the original outbreak in 2020.   

The spot price for ore landed in China dropped 87 US cents or 0.7 per cent to US$132.47 a tonne. The most-active iron ore futures on the Dalian Commodity Exchange for September delivery fell as much as 4.1% to 806 yuan (US$119.99) a tonne.

Copper declined 0.5 per cent on the Shanghai Futures Exchange. In London, benchmark copper eased 0.2 per cent to US$9,345.50 a tonne. Aluminium dipped 0.3 per cent, zinc 0.3 per cent and tin 1.2 per cent. Nickel put on 1.6 per cent and lead 1.2 per cent.

“There are still concerns about the Chinese economy. When we don’t see any movement in China away from that strict COVID policy, the market just tends to slip away,” Robert Montefusco of broker Sucden Financial told Reuters.

“We also still have liquidity issues in the market. The general feeling is a wait-and-see approach, people are just trying to ascertain what’s going on and how this inflation problem plays out.”

Demand worries weighed on BHP and Rio Tinto. BHP‘s US-traded depositary receipts dropped 0.41 per cent. In the UK, BHP’s stock fell 0.6 per cent. Rio Tinto shed 0.27 per cent in the UK before bouncing 0.33 per cent in the US.

Gold eked out a slim advance as the market mood favoured riskier assets. Metal for June delivery settled US$1.30 or 0.1 per cent higher at US$1,847.60 an ounce. The NYSE Arca Gold Bugs Index eased 0.6 per cent.

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