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Shares look poised to give back most of yesterday’s ‘rate hope’ rally after the dollar rebounded and Wall Street closed mixed.

Traders piled into stocks yesterday after the Reserve Bank left the door open to further rate cuts. The ASX 200 surged 47 points or 0.7 per cent to a three-month high as the outlook for bank deposits, bonds and the local currency was dimmed by signals the cash rate could fall as low as 0.25 per cent next year. The dollar dropped under 68 US cents.

Some of that impulse wore off overnight. Index futures skidded 35 points or 0.5 per cent to 6786 as the dollar recouped its losses. The Aussie was lately up a quarter of a cent at 68.25 US cents. A strengthening dollar acts as a headwind for Australia’s largely export-driven market.

Bond proxies outperformed yesterday after the minutes from this month’s RBA meeting showed how close the central bank came to lowering the cash rate. The minutes noted “a case could be made to ease monetary policy at this meeting” and added that the Board “was prepared to ease monetary policy further if needed”.  

A subdued night on Wall Street saw the major indices edge to fresh records before closing mixed. The S&P 500 finished the session barely changed, off two points or 0.06 per cent. Strength in social media giant Facebook helped the Nasdaq rise 21 points or 0.24 per cent. A disappointing sales update from Home Depot helped drag the Dow down 102 points or 0.36 per cent.

Expectations for the Christmas retail season in the US were dampened by downbeat updates from DIY chain Home Depot and department store Kohl’s. Home Depot cut its sales forecast for the year. Kohl’s missed its quarterly sales target and cut its full-year profit forecast. The consumer discretionary sector was the biggest drag on the S&P 500.

The market shrugged off a threat from President Donald Trump to raise tariffs on Chinese imports if trade talks fall through. During a Cabinet meeting, Trump told reporters, “If we don’t make a deal with China, I’ll just raise the tariffs even higher.”

A recovery in iron ore continued into a sixth session, boosting ore miners. The spot price for ore landed in China rose 75 cents or 0.9 per cent to $US85.85 a dry ton. BHP’s US-listed stock gained 0.91 per cent and its UK-listed stock 1.07 per cent. Rio Tinto added 0.98 per cent in the US and 1.15 per cent in the UK.

Oil slid to its lowest level of the month after Reuters reported Russia will resist pressure from OPEC to reduce production to support prices. Brent crude settled $1.53 or 2.5 per cent lower at  $US60.91 a barrel, its weakest close since October 31. OPEC meets on December 5 and is expected to push members to reduce output.

Copper rallied after China’s central bank governor pledged greater support for the economy. The People’s Bank of China is expected to lower its key loan rate today. Benchmark copper rose 0.8 per cent on the London Metal Exchange. Lead gained 2 per cent. Aluminium eased 0.4 per cent, nickel 1 per cent and tin 0.5 per cent. Zinc was flat.

Gold ended higher after a generally sideways session as traders awaited clarity on trade talks. Gold for December delivery settled $2.40 or 0.2 per cent ahead at $US1,474.30 an ounce.

Looking ahead, there is nothing scheduled on the domestic economic calendar today likely to move markets. Wall Street has crude oil inventories tonight and the minutes from the last Federal Reserve meeting.

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