A new week looks set for a cautious start as investors wait to see if the ASX and Wall Street can build on their best weekly returns in months.
ASX SPI200 index futures eased five points or 0.1 per cent despite a positive end to Wall Street's strongest week since July.
The S&P 500 climbed 30 points or 0.88 per cent after President Donald Trump increased his offer for a new coronavirus relief package. The Dow Jones Industrial Average rose 161 points or 0.57 per cent. The Nasdaq Composite added 159 points or 1.39 per cent.
Friday's gains put the icing on a strong week for US stocks amid increasing indications from polling that the Democrats may sweep next month's election, clearing the way for a larger stimulus package than the White House is currently offering. Stimulus negotiations remained mired in pre-election sparring.
The S&P 500 put on 3.8 per cent for the week, the Nasdaq 4.6 per cent and the Dow 3.3 per cent. The Russell 2000 index of small caps - used by some investors as a gauge of risk appetite - surged 6.4 per cent.
Technology and consumer discretionary were the pick of the sectors on Friday, both rising 1.5 per cent. The energy sector fell 1.6 per cent as oil settled lower.
The prospects for any sort of stimulus deal before the election appeared to dim over the weekend after Democrat House Speaker Nancy Pelosi rejected the latest offer from the White House and several Senate Republicans reportedly raised objections in a conference call with Treasury Secretary Steven Mnuchin. Pelosi called the proposed US$1.8 trillion White House stimulus package "one step forward, two steps back".
A new reporting season gets underway in the US this week, which may inject fresh volatility. Expectations are low for a quarter when companies still battled the effects of the pandemic. Earnings are estimated to fall 12.7 per cent from the same period last year following declines of 14.1 per cent in the first calendar quarter and 31.4 per cent in the second quarter.
"The second quarter was terrible, and this will be better than terrible, but still not necessarily good,” James Gellert, chief executive of data and analytics company Rapid Ratings, said.
The S&P/ASX 200 will start the session near a five-week high after soaring 5.4 per cent last week, the index's best performance since the April rebound from the initial pandemic plunge. The market got a sugar hit from a big-spending federal budget and increasing expectations the Reserve Bank will cut the cash rate to a new record low next month.
The going may get tougher this week as the index leans against overhead chart resistance that held off rallies in June, July and August.
"6200 is clearly the next level of chart resistance," ThinkMarkets Market Analyst Carl Capolingua said. "We're roughly only 80 points from that now. So, I expect... [this] week we'll get a good read on whether we'll fail there, or hopefully, push through and look upwards to those February highs."
The domestic economic calendar is light until Thursday, when the Australian Bureau of Statistics releases September jobs data, and Reserve Bank Governor Philip Lowe addresses an investment conference. The share market is pricing in a cut to the official cash rate at the November central bank meeting and will look to Lowe's speech for confirmation. The ASX's RBA Rate Indicator tool currently has the odds on a cut next month at 76 per cent.
The dollar started the week in reverse, falling 0.33 per cent to 72.17 US cents.
Oil stocks retreated as the end of a strike in Norway took some of the wind out of a rally that had lifted crude more than 9 per cent in a week. Brent crude settled 49 cents or 1.1 per cent lower at US$42.85 a barrel.
The Arca Gold Bugs index of US gold miners jumped 4.9 per cent as the yellow metal scored its highest close in three weeks. Gold for December delivery settled $31.10 or 1.6 per cent ahead at US$1,926.20 an ounce as the US dollar retreated.
A post-Chinese holiday pop in iron ore helped BHP and Rio Tinto rise in overseas trade. BHP's US-listed stock put on 0.67 per cent and its UK-listed stock 1.23 per cent. Rio Tinto gained 0.93 per cent in the US and 1.29 per cent in the UK. The spot price for iron ore landed in China improved $2.70 or 2.2 per cent to US$125.85 a tonne.
A strike at a mine in Chile helped copper hit a two-week peak. Benchmark copper on the London Metal Exchange rose 1.3 per cent to US$6,767.50 a tonne after workers at Lundin Mining's Candelaria copper mine downed tools over wage negotiations. Aluminium rose 2.2 per cent, nickel 3.8 per cent, lead 1.2 per cent, zinc 3.1 per cent and tin 0.7 per cent.