A record close on Wall Street, progress on trade and unexpectedly strong Chinese factory data point to a positive start to the Australian trading week.
ASX SPI200 index futures rallied 25 points or 0.4 per cent to 6671 as the Nasdaq joined the S&P 500 at an all-time closing high. The Dow closed just 12 points or less than 0.1 per cent off its July record.
US stocks rumbled higher after October jobs figures smashed expectations, and China said it had reached “consensus on principles” on a trade deal. The S&P 500 surged 29 points or 0.97 per cent to complete a weekly gain of 1.47 per cent. The Nasdaq gained 94 points or 1.13 per cent on the day and 1.74 per cent for the week. The Dow added 301 points or 1.11 per cent for a weekly tally of 1.44 per cent.
Lingering concerns about a potential recession in the US were swept aside by the October jobs report, which included substantial revisions to previously reported figures. Nonfarm payrolls increased by 128,000 during October. That was despite a strike at General Motors that knocked 36,000 positions off the tally because striking workers are treated as unemployed. Economists expected jobs growth of just 89,000. In addition, the August and September jobs totals were revised up by 95,000.
Yo-yoing sentiment towards US-China trade talks swung higher once again following talks between the principal negotiators. China’s Commerce Ministry said they had reached a consensus during a “serious and constructive” phone call. A White House spokesman said they had made “enormous progress” and hoped to sign a deal this month. A fresh round of US tariffs on Chinese imports is due to kick in on December 15.
While US manufacturing data reported on Friday showed the trade fight was taking its toll, Chinese figures were unexpectedly strong. The Caixin/Markit Manufacturing PMI indicated Chinese activity expanded for a third month to the fastest pace in more than two years. The report, released mid-session Australian time, helped the ASX 200 reverse early losses and close six points or 0.1 per cent higher.
Resource stocks look set to spearhead today’s ASX gains following strong advances on overseas exchanges. BHP’s US-listed stock rallied 2.21 per cent and its UK-listed stock 2.36 per cent. Rio Tinto gained 3.79 per cent in the US and 3.84 per cent in the UK.
Iron ore and industrial metals responded to improved demand expectations. The spot price for ore landed at Tianjin rose $2.70 or 1.2 per cent to $US85 a ton. Benchmark copper and aluminium gained 0.4 per cent on the London Metal Exchange. Lead was bid up 0.1 per cent in official rings, nickel 0.5 per cent, tin 0.3 per cent and zinc 0.4 per cent.
News of a decline in active US drilling rigs helped oil trim losses for the week. Brent crude rose $2.07 or 3.5 per cent to $US61.69 a barrel. The rally left the global benchmark 0.1 per cent in the red for the week.
Gold held its ground above $US1,500 an ounce as softness in US manufacturing and declining bond yields provided support. Gold for December delivery eased $3.40 or 0.2 per cent to $US1,511.40 an ounce.
The dollar opened the new week less than a tenth of a cent ahead at 69.17 US cents this morning.
Looking to the week ahead, domestic retail sales figures and job ads are scheduled today, a Reserve Bank board meeting tomorrow, and a Reserve Bank monetary policy statement on Friday. The central bank is widely expected to sit on its hands tomorrow: the ASX RBA Rate Indicator puts the chance of a cut at just 7 per cent. Two of the big four banks are due to report earnings: Westpac this morning and NAB on Thursday. China releases services industry figures tomorrow. In the US, the quarterly reporting season is winding down, with almost three-quarters of S&P 500 companies having reported, including most of those with the weight to move markets. Economic data is also light this week.