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Australian stocks have broadly positive leads for a holiday-shortened week after a seasonal Santa rally lifted Wall Street to fresh highs before a mixed finish overnight.

The S&P 500 hit intraday records on Monday and again last night. The broadest of the US benchmarks backed off its peak as a four-session rally lost momentum. The Nasdaq also retreated. The Dow and Brent crude rose for a fifth night.

Gold edged higher in light trade. Iron ore and copper declined. The dollar backed off its strongest level in more than a month.

Trade in Australian ASX futures remained suspended this morning for the Christmas holiday.

Wall Street

US stocks took a breather overnight following four days of strong gains. The S&P 500 logged a fresh intraday record at 4,807, but could not sustain it amid low holiday volumes. The index finished five points or 0.1 per cent lower at 4,786.

The Dow Jones Industrial Average climbed 96 points or 0.26 per cent to a fifth straight advance. The Nasdaq Composite eased 89 points or 0.56 per cent.

“This is a holiday-shortened week. So daily movements will likely be exaggerated because of a low relative volume,” Sam Stovall, chief investment strategist at CFRA Research, told Reuters.

Last night’s mixed finish broke a run of positive sessions for all three indices. On Monday, the S&P 500 surged 1.38 per cent to its 69th record close of the year. The Dow put on 0.98 per cent and the Nasdaq 1.39 per cent.

Big Tech accounted for much of the overnight weakness amid optimism about the economic outlook after the US Centers for Disease Control and Prevention halved the recommended isolation period for Americans with symptom-free Covid. The federal health agency announced asymptomatic Americans and close contacts need only quarantine for five days, rather than ten.

Alphabet shed 0.82 per cent, Apple 0.58 per cent and Microsoft 0.35 per cent.  Nvidia dropped 2.01 per cent.

Cyclical stocks rose after a South African study suggested infection with the omicron Covid variant provided some protection against the delta strain. The study had not been peer reviewed.

“These results are consistent with Omicron displacing the Delta variant, since it can elicit immunity which neutralizes Delta making re-infection with Delta less likely,” scientists at the Africa Health Research Institute wrote.

Airline stocks rebounded after falling on Monday as labour shortages forced carriers to cancel thousands of flights over the Christmas weekend. The S&P 500 airlines index bounced 1.46 per cent. Boeing climbed 1.48 per cent after Indonesia lifted a ban on the troubled 737 MAX.

Australian outlook

The S&P/ASX 200 enters an abbreviated week on a four-session win streak. The Australian benchmark climbed 33 points or 0.44 per cent on Christmas Eve to its highest close since November 16.

While the absence of futures trade clouds the prospects for the day ahead, back-to-back intraday records for the S&P 500 should support further gains. Seasonal factors favour a positive end to the year despite overhead technical resistance.

Low trading volumes will exaggerate movements. Many institutional trading desks will be running skeleton crews, if at all. Any gains will likely be constrained by signs last night that the Santa rally may be losing momentum.

US trade took a mild defensive bent. Utilities and consumer staples were the pick of the sectors, rising 0.93 and 0.62 per cent, respectively.

Most cyclical sectors were also positive. Materials gained 0.56 per cent and industrials 0.51 per cent. Financials edged up 0.05 per cent. Tech was weakest with a loss of 0.59 per cent.

The economic and corporate calendar is predictably thin this week. Domestically, there is nothing of note. The pipeline of initial public offerings dries up this week before sputtering back into life in the new year.

China releases manufacturing and service-sector PMIs on Friday. Wall Street has a handful of reports scattered across the remainder of the week, including house sales, crude oil inventories and weekly benefits claims.

The dollar hit a one-month peak yesterday. The Aussie traded as high as 72.65 US cents and this morning was steady at 72.34 US cents.

Commodities

BHP and Rio Tinto retreated in US trade following down-pressure on raw materials overnight. The declines came amid concern demand may be insufficient to soak up production as steel mills return to normal output in the wake of this year’s government-mandated curbs.

The spot price for iron ore landed in China eased US$1 to US$126.50 a tonne. The most-traded futures contract on the Dalian Commodity Exchange declined 3.4 per cent.

BHP‘s US-listed stock retreated 1.11 per cent. Rio Tinto shed 0.71 per cent in the US. Trade in London was suspended for the Christmas break.

Oil booked a fifth straight advance as omicron demand worries continued to dissipate. Brent crude settled 34 US cents or 0.4 per cent ahead at US$78.94 a barrel.

Gold reversed most of Monday’s loss in thin trade. Metal for February delivery settled US$2.10 or 0.11 per cent ahead at US$1,810.90 an ounce. The advance was the yellow metal’s third in four sessions. On Monday, gold dipped US$2.90 or 0.2 per cent. The NYSE Arca Gold Bugs Index fell 0.38 per cent overnight.

Copper gave back around half of Monday’s advance. US-traded copper dropped 3.9 cents or 0.9 per cent on Comex after rising 1.8 per cent on Monday. The London Metal Exchange was closed for Christmas.

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