A record night on Wall Street and the lure of a rate cut this afternoon have Aussie stocks primed to open higher. The September SPI 200 futures contract rallied 19 points or 0.3 per cent to 6606 after the S&P 500 in the US closed at an all-time high. The Reserve Bank meets today and is widely expected to lower its key rate.
US stocks opened at record levels, but trimmed their gains as initial exuberance over the resumption of trade talks with China wore off. The S&P 500 gained as much as 1.2 per cent before closing 0.77 per cent ahead. The Dow put on 0.44 per cent. The Nasdaq was the night’s big winner, rising 1.06 per cent after the White House cleared the way for American tech companies to resume selling to blacklisted Chinese telecommunications giant Huawei. Apple jumped 1.8 per cent.
The White House agreed on the weekend not to impose additional tariffs on Chinese imports. In exchange, China will return to the negotiating table and purchase an undefined quantity of US farm goods. However, analysts cautioned that although the two countries have resumed negotiations, there was still no clear path to end a damaging trade war that has dragged on for more than a year.
Chinese investors welcomed the news, sending the Shanghai Composite 2.22 per cent higher yesterday despite some soft domestic factory data. Here, the ASX 200 bounced 29 points or 0.4 per cent. The big local miners provided much of the momentum as iron ore hit a fresh five-year peak. Spot ore rose 2.8 per cent to $US121.20 a dry ton. Overnight, BHP put on 0.87 per cent in the US and 0.55 per cent in the UK. Rio Tinto gained a fraction over 0.7 per cent in both markets.
The trade breakthrough had limited impact on industrial metals, with traders more concerned about the demand implications of soft Chinese manufacturing data. Copper touched a six-week high on the London Metal Exchange before fading to a loss of 0.6 per cent. Aluminium slid 0.3 per cent, zinc and lead 1.3 per cent, and nickel 2.7 percent. Tin gained 0.4 per cent.
Oil traded briefly above $US60 a barrel before easing as traders waited for OPEC to confirm production curbs. Texas crude settled 62 cents or 1.1 per cent ahead at $US59.09 a barrel, some distance short of the day’s high at $US60.28.
The rout in gold that commenced during Australian trading hours yesterday deepened overnight. The precious metal suffered its heaviest loss in a year as traders abandoned havens, and the greenback climbed to a six-day peak. August gold slumped $24.40 or 1.7 per cent to settle at $US1,389.30 an ounce.
The recovery in the US dollar pushed the Australian unit back under 70 US cents. The Aussie was this morning buying 69.6 US cents, a decline of four-fifths of a cent.
The RBA meets this morning and is due to release a policy statement and any change to the cash rate at 2.30 pm Eastern Standard Time. ASX 30-day interbank cash rate futures indicate traders believe there is a 77 per cent chance the central bank will reduce its key rate by 25 basis points this afternoon to a record low 1 per cent. A minority of analysts believe the bank may hold off today and instead cut in August.