SPI200 index futures eased nine points or 0.1 per cent to 6463 as traders hedged about today’s market direction. The benchmark Australian index, the ASX 200, yesterday rose 29 points or 0.4 per cent to a second straight gain.
US stocks rallied overnight as bulls took advantage of a lull in trade hostilities and an absence of economic data. The S&P 500 advanced 19 points or 0.65 per cent as energy, financial and consumer stocks made gains. The Dow put on 258 points or 1 per cent as Chevron and Exxon Mobil were lifted by a surge in crude oil. The Nasdaq trailled with a rise of 30 points or 0.38 per cent after key tech stocks under-performed, including Facebook and Microsoft.
The energy sector put on 1.4 per cent on news of a sharp drop in US inventories. Brent crude settled 98 cents or 1.7 per cent higher at $US60.49 a barrel after the US Energy Information Administration reported that crude supplies declined by 10 million barrels last week, the largest one-week drop in five weeks. Oil rallied yesterday after figures released by the OPEC – the Organization of the Petroleum Exporting Countries – showed greater compliance with the organisation’s production limits.
Market analysts continued to debate the meaning of a continuing inversion in the bond yield curve, which deepened overnight. The spread between the two-year US treasury rate and the ten-year increased from five basis points to six, a new 12-year record. A yield inversion is seen by some technical traders as an early indicator of impending recession.
An uptick in iron ore helped BHP and Rio Tinto in overseas trade. BHP’s US listing advanced 1.42 per cent and its UK listing 2.36 per cent. Rio Tinto added 1.04 per cent in the US and 1.39 per cent in the UK. The spot price for ore landed in China yesterday rose 40 cents or 0.5 per cent off a seven-month low to $US83.50 a tonne.
Gold consolidated near six-year highs as a rising greenback capped buying interest. Gold for December delivery settled $2.70 or 0.2 per cent lower at $US1,549.10 an ounce. The precious metal closed on Tuesday at its strongest level since April 2013.
Nickel was the pick of the industrial metals, rising to a one-week peak. The metal used to make stainless steel is up 50 per cent this year after major producer Indonesia announced an export ban starting in 2022. Overnight nickel jumped 2.6 per cent on the London Metal Exchange. Copper was the only other metal to make headway, edging up 0.2 per cent. Aluminium shed 1 per cent, lead 1.8 per cent, tin 0.1 per cent and and zinc 0.8 per cent.
A rising greenback pressured the dollar. The Aussie dropped a quarter of a cent to 67.34 US cents.
Turning to the day ahead, quarterly private business expenditures – a measure of economic health – are due at 11.30am Eastern Standard Time. Quarterly GDP figures should set the tone on Wall Street tonight. Looking further out, the latest round of trade tariffs are due to come into effect in the US and China on Sunday. US markets are closed on Monday for Labor Day.