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A strong start to a new US earnings season points to a second day of gains for Australian stocks.

ASX futures surged 46 points or 0.63 per cent as Wall Street’s major indices all gained at least 1.5 per cent.

Oil hit fresh multi-year highs. Zinc touched its strongest level in 14 years. Copper, nickel, gold and iron ore also advanced. The dollar pushed above 74 US cents.

Wall Street

US stocks mounted their biggest rally since March as investors cheered third-quarter earnings from the likes of Bank of America, Citigroup and Dow component companies UnitedHealth and Walgreens Boots Alliance. All eight S&P 500 companies that reported overnight beat earnings expectations, according to CNBC.

The S&P 500 rallied 74 points or 1.71 per cent. The Dow Jones Industrial Average gained 535 points or 1.56 per cent. The Nasdaq Composite added 252 points or 1.73 per cent.

All 11 sectors rallied. The financial sector climbed 1.7 per cent as Bank of America popped 4.47 per cent, Citigroup 0.7 per cent and Morgan Stanley 2.46 per cent. Dow components Walgreens and UnitedHealth put on 7.43 and 4.17 per cent, respectively.

“So far, the overwhelming majority of large US companies have been able to generate higher profitability despite rising labor costs because sales growth has been so robust. We expect the same to be true in 3Q,” Mark Haefele, chief investment officer of UBS Global Wealth Management, told investors.

Big Tech shone for a second night as long-term interest rates continued to retreat in the wake of Wednesday night’s update from the Federal Reserve. The minutes from last month’s meeting showed the central bank was preparing to reduce its bond-buying program as soon as next month. The yield on ten-year US treasuries fell for a third session after touching a four-month high earlier this week.

Alphabet gained 2.59 per cent. Microsoft, Apple and Facebook all put on at least 1.2 per cent. Computer chip stocks were boosted by upbeat guidance from bellwether company Taiwan Semiconductor Manufacturing.

Market sentiment was lifted by a milestone for labour markets. First-time claims for unemployment benefits fell to 293,000 last week – the first reading below 300,000 of the pandemic era. Economists polled by Dow Jones had predicted a smaller decline to 318,000.

Producer prices increased less than expected last month, soothing worries about inflation. The September producer price index increased 0.5 per cent, versus expectations for a rise of 0.6 per cent.

Australian outlook

The mood on global markets has improved significantly this week. Wall Street appears to have come to terms with the likelihood the long-awaited stimulus taper may start as soon as next month. The new US corporate earnings season is in its infancy, but grim predictions of soaring costs and supply chain issues have yet to feature as significant headwinds.

“Some of the things that worried the market in September, and even last week, as far as the inflation aspect and higher interest rates and the Delta variant I think maybe have lessened,” Alan Lancz, president of advisory firm Alan B. Lancz & Associates, told Reuters.

“Not that it’s all over, but on a temporary scale at least, you can make a case for it trending in the right direction.”

The S&P/ASX 200 hit a two-and-a-half-week high yesterday and appears to have built a base since last month’s four-month low. A positive session today would seal a second week of gains.

All 11 US sectors rallied, with gains ranging from 0.99 per cent (consumer discretionary) to 2.43 per cent (materials). The tech sector put on 2.28 per cent and financials 1.71 per cent. Energy stocks rose 1.23 per cent, resuming their uptrend after a pause on Wednesday night.

There is nothing on the economic calendar today to change the overnight narrative. Treasury Wine Estates holds its AGM this morning.

The dollar climbed 0.48 per cent overnight to 74.18 US cents.

Commodities

Oil hit a fresh seven-year high in the US after the International Energy Agency raised its demand forecast to reflect natural gas and coal shortages. The IEA said power generators were being forced to switch to crude. West Texas Intermediate settled 87 US cents or 1.1 per cent ahead at US$81.31 a barrel after trading as high as US$81.68. Brent crude settled 82 US cents or 1 per cent higher at US$84 a barrel.

Iron ore rose for the first time in three sessions as buyers looked beyond fresh Chinese curbs on steel production. The government announced restrictions this week on output for 28 northern cities to reduce pollution ahead of the Winter Olympics. The spot price for ore landed in China improved US$2.40 or 1.9 per cent to US$126 a tonne.

BHP‘s US-listed stock surged 3.78 per cent after its UK-listed stock gained 3.7 per cent. Rio Tinto advanced 2.94 per cent in the US and 3.67 per cent in the UK.

Gold rose for a third session in the wake of Wednesday’s strong consumer inflation data. Gold for December delivery settled US$3.20 or 0.2 per cent ahead at US$1,797.90 an ounce after trading briefly above US$1,800. The NYSE Arca Gold Bugs Index rose 1.83 per cent.

“Gold and silver roared back alive this week and it is showing how oversold and appealing it is to buyers on pullbacks, with growing inflation concerns globally and deep negative real yields,” Peter Spina, president and chief executive officer at GoldSeek.com, told MarketWatch.

Zinc climbed almost 7 per cent on the London Metal Exchange overnight after major producer Nyrstar announced it was reducing output at its three European smelters because of soaring power prices. Benchmark zinc traded as high as US$3,637.50 a tonne, a level last seen in July 2007, before trimming its advance to 3.8 per cent at US$3,555.50.

Copper jumped 3.8 per cent to US$10,131 a tonne. Aluminium gained 1.6 per cent, nickel 2 per cent, lead 1.7 per cent and tin 1 per cent.

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