The prospect of a fresh round of rate cuts around the globe kept the party going overnight, although index futures trading suggests the ASX pre-empted most of the gains yesterday. The ASX 200 yesterday advanced 39 points or 0.6 per cent to its highest close since November 2007. This morning the September SPI 200 futures contract – now the most actively traded – eased four points or less than 0.1% to 6617.
The S&P 500 surged 28 points or 0.95 per cent to a record close as investors bet the Federal Reserve will cut rates as early as next month. The Dow put on 0.94 per cent and the Nasdaq 0.8 per cent.
Energy stocks led the advance after an Iranian missile attack on a U.S. military drone helped fuel oil’s biggest rise of the year. Iran’s Revolutionary Guard said it shot down the drone over Iranian air space near the Strait of Hormuz, an important conduit for oil tankers. Texas crude jumped $2.89 or 5.4 per cent to settle at $US56.65 a barrel on the New York Mercantile Exchange, the highest close of the month.
Gold was the session’s other standout, hitting a five-year peak in U.S. dollars and breaking through the $A2,000 mark for the first time. The prospect of a weaker greenback catapulted August gold $48.10 or 3.6 per cent to settle at $US1,396.90 an ounce. The percentage gain was the biggest since 2016.
Australian gold miners were yesterday’s standout as the rally gathered momentum because the gains were even greater expressed in Australian dollars. Local heavyweight Newcrest hit a seven-year peak and Evolution Mining an all-time high.
A fresh five-year high in iron ore looks set to support the big miners. Rio Tinto rebounded 0.7 per cent in UK trade and 0.8 per cent in US trade. BHP shares put on 2 per cent in the UK and 2.4 per cent in the US. Spot iron ore yesterday gained $3.30 or 2.9 per cent at $US117.55 a tonne.
Copper and nickel marked three-week highs as investors sought alternative stores of wealth to the weakening greenback. Copper rose 0.9 per cent, nickel 1.7 percent, lead 0.5 per cent and tin 1.3 per cent. Aluminium eased 0.1 per cent and zinc 0.4 per cent.
The dollar has been under pressure because the Reserve Bank looked to be ahead of the pack in cutting rates this month. Overnight, it rebounded more than half a cent to 69.2 US cents as investors bet the Fed will soon follow suit.
Hong Kong shares reached a six-week high yesterday as Asian markets continued to bet that next week’s G-20 summit will mark a breakthrough in the US-China trade war. The Hang Seng put on 1.23 per cent and China’s Shanghai Composite 2.38 per cent.
Looking ahead, there are a rash of manufacturing and services gauges due to be released over the next 24 hours, starting with the local versions at 9am EST and concluding with US releases tonight. This week in markets has been all about central banks, but the G-20 meeting next week between US President Donald Trump and Chinese President Xi Jinping means next week is likely to be about trade.