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Australian stocks were set to open higher following a strong rebound on Wall Street as oil and natural gas hit multi-year peaks.
ASX futures firmed 36 points or 0.5 per cent after US stocks recouped most of Monday night’s losses.
US crude rose for a fourth night to a fresh seven-year high. Natural gas jumped 9.5 per cent to its highest since December 2008. Gold and copper declined.
Wall Street
Big Tech rebounded and cyclical sectors advanced during a broad-based rally. The S&P 500 bounced 45 points or 1.05 per cent.
The Dow Jones Industrial Average gained 312 points or 0.92 per cent. The Nasdaq Composite put on 178 points or 1.25 per cent.
Bargain-hunters took advantage of Monday’s declines in the market-leaders even as long-term rates rose. The yield on ten-year US treasuries climbed more than five basis points to 1.536 per cent.
Apple rebounded 1.42 per cent, Microsoft 2 per cent, Amazon 0.98 per cent, Alphabet 1.77 per cent and Facebook 2.06 per cent.
“We’re buying the dip, but the dip isn’t 10% anymore. The dip is now 2%, or 4%,” Jake Dollarhide, chief executive officer of Longbow Asset Management, told Reuters. “People are trained like Pavlov’s dog to buy the dip, which is reinforcing all of this.”
Stocks tied more directly to the economy climbed after a report showed services sector activity increased last month, soothing concerns about a Delta-fuelled slowdown. The Institute of Supply Management’s non-manufacturing activity index rose to 61.9 from 61.7 in August.
“The slight uptick in the rate of expansion in the month of September continued the current period of strong growth for the services sector,” ISM said.
Market sentiment was also helped by possible progress towards lifting the federal debt ceiling. The Senate was due to vote tonight on a Democrat bill to suspend the ceiling. The Treasury Department warned last week that Congress must address the issue before October 18 or the government will be unable to pay its bills.
Banks were amongst the night’s best performers. Goldman Sachs, Bank of America and Wells Fargo all gained at least 2 per cent. Lenders benefit from higher margins when rates improve.
Australian outlook
Another change of direction is coming up following six sessions where the ASX 200 has moved more than 1 per cent. Investors could be forgiven for suffering motion sickness. The index has reversed direction each session since back-to-back declines last Tuesday-Wednesday.
Market bulls looking for a change in the current downtrend will note the size of the swings have diminished over the last two sessions and the index has so far respected last Friday’s four-month closing low.
US gains were broad enough to offer support for most of the sectors that matter here. Financials jumped 1.78 per cent and materials 0.94 per cent. Technology – yesterday’s biggest ASX loser – bounced 1.46 per cent.
Energy stocks, yesterday’s best ASX performer, put on 0.58 per cent. Two bond proxies missed the boat: real estate -0.86 per cent and utilities -0.19 per cent.
Back home, Meridian Energy holds its AGM today.
IPOs: two listings originally scheduled for today have been pushed back. NickelSearch will now list on Monday, Alvo Minerals on a date to be announced.
The dollar ended the night steady at 72.88 US cents.
Commodities
Natural gas recorded its highest close in almost 13 years as supplies continued to tighten heading into the northern-hemisphere winter. Gas futures for November delivery jumped 55 US cents or 9.5 per cent to US$6.312 per million British thermal units.
“With the global crude market consistently undersupplied already, record gas prices across key demand regions are expected to cascade into a strong uptick in heating demand for products like diesel and fuel oils,” Robbie Fraser, global research & analytics manager at Schneider Electric, said.
Oil rallied for a fourth night, adding to gains since the Organization of the Petroleum Exporting Countries ignored calls to ramp up production significantly to contain prices. The US benchmark, West Texas Intermediate, rose US$1.31 or 1.7 per cent to US$78.93 a barrel, the highest settlement since October 2014. Brent crude settled US$1.30 or 1.6 per cent ahead at US$82.56 a barrel.
Gold fell for the first time in four sessions as the US dollar and treasury yields rose. Gold for December delivery settled US$6.70 or 0.4 per cent lower at US$1,760.90 an ounce. The NYSE Arca Gold Bugs Index dipped 0.04 per cent.
BHP and Rio Tinto closed mixed but little changed in the wake of yesterday’s soft ore export data. BHP’s US-listed stock eased 0.13 per cent after its UK-listed stock gained 0.67 per cent. Rio Tinto slipped 0.27 per cent in the US and 0.11 per cent in the UK. The spot price for iron ore landed in China was steady at US$117.80 a tonne.
Copper fell under pressure from a rising greenback, which made the metal more expensive for holders of other currencies. December copper dropped 1.1 per cent on Comex to US$4.193 a pound.
On the London Metal Exchange, copper shed 0.9 per cent. Aluminium and lead put on 0.3 per cent, nickel 1.2 per cent, zinc 1 per cent and tin 1.8 per cent.
