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Aussie shares were set to open cautiously higher as investors weigh a record close on the Nasdaq and a rebound in oil against a jump in the dollar and further pressure on iron ore.  

ASX futures edged up ten points or 0.13 per cent following solid gains in the US after regulators granted full approval to Pfizer’s vaccine.  

Oil logged its biggest rise since March. Gold and copper rallied. The dollar bounced more than 1 per cent. Iron ore faded almost 2 per cent.

Wall Street

US stocks recovered from last week’s setback as positive Covid and economic news boosted cyclicals, and funds continued to flow into Big Tech.  

The Nasdaq Composite surged 228 points or 1.55 per cent to a record close. The S&P 500 hit a fresh intraday high before ending 38 points or 0.85 per cent ahead. The Dow Jones Industrial Average added 216 points or 0.61 per cent.

Pfizer shares jumped 2.48 per cent and BioNTech 9.58 per cent after their Covid vaccine became the first to obtain full US Food and Drug Administration approval for use (as opposed to emergency approval). Shares in rival Moderna climbed 4.7 per cent.

Travel and tourism stocks rose on hopes the FDA decision will encourage more unvaccinated Americans to get the jab. The S&P 1500 airlines index gained 3.01 per cent. Cruise lines Carnival and Norwegian gained around 4 per cent. Theme park operator Disney added 1.45 per cent.

“To the extent that the general public becomes more comfortable living with the virus, the economy is likely to continue on its upward trajectory,” Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, told CNBC.

Energy stocks drove the S&P 500 higher as oil rebounded on news China recorded zero new Covid cases yesterday for the first time since July. Brent crude surged US$3.57 or 5.5 per cent to settle at US$68.75 a barrel. The rally broke a seven-session losing run.

“Oil was way oversold and [a] fire sale was on,” Naeem Aslam, chief market analyst at AvaTrade, told MarketWatch. “Bargain hunters are wasting no time to closing the deal and this is pushing the price higher.”

The US energy sector rose 3.77 per cent. Chevron gained 2.58 per cent, Exxon Mobil 4.11 per cent and Occidental Petroleum 6.92 per cent.

The major US indices shed between 0.6 and 1.1 per cent last week after the Federal Reserve indicated it might reduce support for the economy before year-end. Data last night showed house sales unexpectedly increased last month and business activity continued to expand, albeit at a slower rate.

“This has been the script all along,” Peter Cardillo, chief market economist at Spartan Capital Securities, told Reuters. “We make new highs, pull back, and then we’re off to the races again.”

“It’s hard to keep this market down,” he added.

Australian outlook

The ASX has a green light to continue the repairwork that started yesterday following the market’s worst week since January. The S&P/ASX 200 bounced 29 points or 0.39 per cent yesterday as buyers returned.

However, futures action suggests some hesitation after a bruising week. The dollar looms as a potential headwind for an export-dominated market after rebounding 1.02 per cent to 72.11 US cents. The Aussie touched a nine-month low near 71 US cents on Friday night.

A sharp retreat in the greenback from its highest level since November will weigh against companies such as CSL, Transurban and Macquarie Bank, which generate significant earnings in US dollars. The US dollar index fell 0.55 per cent overnight.

Bond proxies dragged in the US: utilities -1.32 per cent, real estate -0.4 per cent and consumer staples -0.32 per cent.

US sector action points to strength in energy +3.77 per cent, technology +1.27 per cent, materials +0.85 per cent and financials +0.78 per cent. An index of US gold stocks jumped more than 4 per cent (more below).

The domestic earnings season powers on with reports scheduled today from Ansell, Oil Search, Estia Health, Alumina, Scentre Group, Reece, Kogan and Monadelphous, according to CommSec. 

IPOs: after the recent drought, there are two companies listed to make their debuts today. Kuniko, listing at 11.30 am AEST, explores for battery metals in Norway. Culpeo Minerals, listing at 1 pm, is a copper explorer with projects in Chile.  

Commodities

BHP and Rio Tinto shrugged off a dip in iron ore. BHP’s US-listed stock put on 1.31 per cent and its UK-listed stock 1.1 per cent. Rio Tinto added 0.66 per cent in the US and 0.54 per cent in the UK.

The spot price for ore landed in China slipped US$2.60 or 1.9 per cent to US$136.50 a tonne. Prices have fallen by roughly 40 per cent in five weeks.

“Iron ore hasn’t fallen this far this fast since spot prices were established for the commodity roughly 13 years ago,” Morgan Stanley said.

Copper rose as a falling US dollar encouraged bargain hunters for a second session. Benchmark copper on the London Metal Exchange surged 2.8 per cent to US$9,301.45 a tonne. Aluminium put on 2.4 per cent, nickel 2.3 per cent, lead 0.6 per cent and tin 0.1 per cent. Zinc eased 0.1 per cent.

Gold regained US$1,800 an ounce for the first time in two weeks. Metal for December delivery settled US$22.30 or 1.3 per cent ahead at US$1,806.30 an ounce. The NYSE Arca Gold Bugs Index jumped 4.26 per cent.

“A significant reversal in the dollar and broad-based risk-on psychology has lifted gold and the rest of the metals complex off fundamental reasons to start the new trading week,” analysts at Zaner metals wrote. “Others are suggesting that the ongoing surge in the delta variant infections is still threatening the global economy and that, in turn, is providing flight to quality buying interest in gold.”

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