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Australian shares were poised to open higher for a fourth day after strong retail sales doused fears of an economic slowdown in the US.  

Wall Street’s main indices closed sharply higher as a rebound from six weeks of steady decline gathered pace. The S&P 500 and Nasdaq Composite gained more than 2 per cent.

ASX futures rallied 70 points or 0.98 per cent. Strengthening mining and energy stocks helped the S&P/ASX 200 climb 19.5 points or almost 0.3 per cent yesterday to a third straight gain.

Wall Street

Stocks most closely leveraged to the economy led after reports on retail sales and industrial production eased recession fears. Value investors were encouraged by news Warren Buffett’s Berkshire Hathaway took advantage of recent weakness to build stakes in Citigroup and Paramount Global.

The S&P 500 climbed 81 points or 2.02 per cent. The Dow Jones Industrial Average firmed 431 points or 1.37 per cent. The Nasdaq Composite gained 322 points or 2.76 per cent.

“April retail sales rose solidly and showed no sign that the consumer is cracking under the weight of inflation, higher interest rates or the lack of stimulus payments,” broker Jefferies said in a note.

Retail sales increased by 0.9 per cent last month, broadly in line with forecasts. Figures for March were upgraded, giving a brighter picture of US consumer strength. Another report showed industrial production increased 1.1 per cent last month, twice the median estimate among economists.

“This is consistent with continued economic growth in the second quarter and not a recession underway,” Bill Adams, chief economist at Comerica Bank, told Reuters.

Investors found the positives in a mixed bag of corporate earnings. Home Depot gained 1.68 per cent after raising its guidance, citing strong demand. Walmart slumped 11.38 per cent on news increased prices will dent its profit outlook.

Big Tech rebounded. Apple, Microsoft and Amazon all gained more than 2 per cent. Nvidia put on 5.29 per cent, Tesla 5.14 per cent and Meta Platforms 1.29 per cent.

Citigroup soared 7.56 per cent after Berkshire Hathaway revealed it bought around US$3 billion of the underperforming bank’s stock in the first quarter. The company also acquired a US$2.6 billion position in Paramount Global. Shares in the entertainment giant jumped 15.35 per cent.

Airlines and other travel stocks rallied after a pick-up in demand prompted a revenue upgrade at United Airlines. Shares in United popped 7.88 per cent. American Airlines added 7.67 per cent and Delta 6.68 per cent. Cruise lines, hotel chains and theme park operators also rose.  

The market had enough momentum to weather hawkish comments from the Chair of the Federal Reserve late in the session. Jerome Powell warned the central bank was willing to raise rates far beyond “neutral” to bring down inflation.

“What we need to see is inflation coming down in a clear and convincing way and we’re going to keep pushing until we see that,” Powell said. “If we don’t see that, we will have to consider moving more aggressively.”  

Australian outlook

A relief rally that commenced on global markets on Friday gained momentum overnight, helped by the absence of apocalyptic US economic data. The market mood had become so bearish that anything less than economic Armageddon met with relief.

The S&P/ASX 200 has bounced more than 170 points from last week’s 15-week low despite signs of buyer hesitancy in the last two sessions. Opinion remains divided on whether world markets have seen the worst of this year’s recession scare or this revival is just another dead cat bounce within a developing bear market.

The dollar continued to recover from last week’s lows, rising 0.82 per cent overnight to 70.28 US cents.

US trading action holds plenty of promise for the day ahead. While tech topped the sector gains (+2.91 per cent), next best were the two sectors with the heaviest weighting on the ASX. Materials gained 2.86 per cent and financials 2.69 per cent.

Consumer discretionary and industrials also put on more than 2 per cent. The defensive consumer staples sector was the only laggard, falling 1.15 per cent.

Back home, first-quarter wage price data at 11.30 am AEST will have more impact than usual, due to the current market focus on inflationary pressures. Rising wages are a leading indicator for consumer inflation. (Essentially, the more businesses have to pay employees, the more costs they have to pass on to the consumer.)

Telix Pharmaceuticals and Eagers Automotive hold annual general meetings today.

IPOs: Aurora Energy Metals lists at 11 am AEST. The company has a uranium project in Oregon, USA, that is also prospective for lithium.

Commodities

Oil backed off a seven-week high after the US eased sanctions against Venezuela, a major producer. The White House reportedly made concessions as relations between the nations continued to thaw following a positive meeting in March.

Brent crude settled US$2.31 or 2 per cent lower at US$111.93 a barrel. The US benchmark fell 1.6 per cent to US$112.40.

Gold extended its recovery from three-month lows, helped by a retreat in the US dollar from near 20-year highs. Metal for June delivery settled US$5.90 or 0.3 per cent ahead at US$1,818.90 an ounce. The NYSE Arca Gold Bugs Index edged up 0.52 per cent.

“A weaker dollar and slight retreat in Treasury yields were seen as key factors triggering a move to the upside,” Lukman Otunuga, senior research analyst at FXTM, wrote.

Copper, sometimes dubbed the “metal with the degree in economics”, climbed to a one-week high after Shanghai eased Covid restrictions. Benchmark copper on the London Metal Exchange climbed 1.4 per cent to US$9,386.25 a tonne.

Aluminium improved 2.2 per cent, lead 0.4 per cent, zinc 2.8 per cent and tin 0.8 per cent. Nickel eased 0.5 per cent.

Iron ore prices were mixed in different markets. Ore imported into northern China climbed 1.24 per cent to US$128.40 a tonne. The spot price for ore landed at Tianjin dipped 92 US cents or 0.7 per cent to US$131.58 a tonne.

BHP‘s US-traded depositary receipts bounced 3.28 per cent. The miner’s UK stock gained 1.96 per cent. Rio Tinto rallied 3.59 per cent in the US and 2.45 per cent in the UK.

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