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The ASX looks set to unwind most of yesterday’s gains after US stocks retreated from record levels.

Australian futures eased 30 points or almost 0.5 per cent, threatening an end to a run of three straight advances straddling the Christmas break. The S&P/ASX 200 edged up 35.5 points or 0.5 per cent yesterday.

Wall Street

The US’s three major benchmarks opened at all-time highs, then surrendered gains as investors waited to see if Congress will increase stimulus payments. The Dow Jones Industrial Average finished 68 points or 0.22 per cent lower after being up more than 100 points.

The S&P 500 dipped eight points or 0.22 per cent, ending a three-session win streak. The Nasdaq Composite shed 49 points or 0.38 per cent.

The Republican-controlled Senate knocked back a Democrat attempt to fast-track a vote on increasing Covid-19 stimulus payments from US$600 to US$2,000. The increase, backed by President Donald Trump, has already passed the Democrat-controlled House of Representatives but needs the support of at least a dozen Republicans to pass in the Senate.

President Trump said Republicans should support the increase unless they “have a death wish”. Majority Leader Mitch McConnell indicated he intends to address the bill this week.

Muddying the waters is next week’s run-off Senate election in Georgia, which could tip the balance of power in favour of the Democrats. Wall Street celebrated in November when initial election results pointed to a divided Congress, limiting Joe Biden’s power to make radical change.

“The balance of the Senate is the big story there, and what it could mean for fiscal strategy and further stimulus going into the new year,” Keith Buchanan, portfolio manager at GLOBALT, told CNBC.

Investors kept a wary eye on a sharp slump in the Russell 2000 index of small caps. The index, used by some as a proxy for risk appetite, dived 1.9 per cent from record levels. The fall was the biggest in two months, according to Reuters.

Intel was the biggest mover on the Dow, rising 4.9 per cent amid reports of hedge fund pressure for a business restructure to unlock value. Apple, Home Depot and Caterpillar were among the biggest drags.

Britain’s FTSE 100 jumped 1.55 per cent ahead of what is expected to be a green light this week for AstraZeneca’s Covid-19 vaccine. The UK has ordered 100 million doses in anticipation of regulatory approval.

Australian outlook

The local market is pretty much on ‘care and maintenance’, with trading volumes over the last two sessions among the lowest of the year. Yesterday’s 407 million trades was roughly half the recent average, and a quarter of the volume five sessions earlier.

The market has noodled higher over the last three sessions, but looks likely to give some back today. There were warning signs in the lack of conviction in the action over the last two sessions. Traders took profits well before the closes.

Today is the last full trading session of 2020. The market takes an early mark tomorrow, wrapping up a memorable year at 2.10 pm AEDT (including closing auction).

While losses in the US were modest, only two sectors resisted the downtrend: health +0.4 per cent and consumer discretionary +0.2 per cent. Energy shed almost 0.7 per cent and materials 0.2 per cent. The financial sector dipped 0.3 per cent.

The domestic economic and corporate calendars are empty today. Company announcements were scarce yesterday and likely to remain so until well into next month.

The dollar climbed 0.25 per cent to 76.07 US cents.

Commodities

Oil edged higher in response to new US stimulus spending. Brent crude settled 23 cents or 0.5 per cent ahead at US$51.09 a barrel.

“Oil appears to be underpinned by the passing of the US stimulus and government funding omnibus legislation,” Jeffrey Halley, senior market analyst at Oanda, wrote.

Gold ticked higher as the US dollar softened and equities declined. Gold for February delivery settled $2.50 or 0.1 per cent higher at US$1,882.90 an ounce. The NYSE Arca Gold Bugs Index edged up 0.2 per cent.

Mining heavyweights BHP and Rio Tinto rose in overnight action despite a flat session here yesterday. BHP’s US-listed stock added 0.63 per cent and its UK-listed stock 0.48 per cent. Rio Tinto put on 0.7 per cent in the US and 1.04 per cent in the UK.

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