Join our daily newsletter At The Bell to receive exclusive market insights
The final week of a ‘lost year’ for investors looks set to open with solid gains after US stocks hit record levels overnight.
The share market has positive leads after President Donald Trump unexpectedly signed a US$900 billion stimulus package into law. US stocks closed at all-time highs. Oil and gold edged lower. ASX futures trading was suspended on Christmas Eve and not scheduled to resume until the start of this morning’s Day Session.
Wall Street
The long wait for a US stimulus package ended on Sunday night when President Trump backed down from earlier threats to veto a bill that restored benefits to millions of Americans and averted a federal government shutdown tonight.
The S&P 500 climbed 32 points or 0.87 per cent to a record close. The Dow Jones Industrial Average gained 204 points or 0.68 per cent. The Nasdaq Composite put on 95 points or 0.74 per cent.
“Equities seem poised to end the year on a high note, and I think for good reason,” Terry Sandven, chief equity strategist at US Bank Wealth Management, told CNBC. “There’s additional government stimulus, which is providing some measure of economic stability; medical progress for Covid-19 continues to evolve; and the macro environment is favourable for stocks.”
After five days of resisting, Trump signed into law a bill that included direct payments of US$600 to most Americans, extended jobless benefits, funded vaccine distribution and provided aid for small businesses, education and airlines. The president’s protests that the stimulus payments should have been larger encouraged Democrats to announce plans to vote to increase payments from US$600 to US$2,000. However, the Republican-controlled Senate was not expected to pass any hike.
Consumer-facing stocks that stand to benefit from the stimulus payments outperformed. The consumer discretionary sector gained 1.5 per cent, technology 1.2 per cent and consumer staples 0.8 per cent. On the Dow, Apple rose 3.6 per cent and Disney 3 per cent.
The S&P 1500 airlines index put on 1 per cent. Airlines stand to receive US$15 billion in payroll assistance. Cruise operators also rallied.
Australian outlook
Barring an eventful final week, the local market appears likely to end the year near where it began. The S&P/ASX 200 started 2020 at 6684.1 and closed at 6664.8 on Christmas Eve. By contrast, the S&P 500 in the US has put on 15.6 per cent this year and the Nasdaq Composite a sizzling 43.8 per cent, according to CNBC.
Today’s outlook is muddied by the absence of futures trading over the Xmas break. However, a record night in the US should provide enough fuel to propel the local market back into positive territory for the year. The ASX 200 edged up 0.3 per cent on Thursday to a second straight positive close.
Resource stocks came under mild pressure in the US. The energy sector declined more than 0.5 per cent and materials almost 0.4 per cent. The financial sector gained 0.5 per cent.
Participation is likely to remain weak until well into next month. The Christmas Eve volume of 277 million trades was the lowest since the market breakdown on November 16.
This week’s economic calendar is predictably light. The US releases housing data and crude oil inventories tomorrow night, and weekly unemployment benefit claims on Thursday night. China releases manufacturing and services activity updates on Thursday. The domestic corporate calendar is empty.
Tomorrow is the last full session of the trading year. Thursday’s session will end two hours earlier than normal at 2.10 pm AEDT (including closing auction). The market is closed on Friday for New Year’s Day.
The dollar slipped 0.46 per cent this morning to 75.76 US cents.
Commodities
Oil quickly faded after an initial boost from the stimulus deal. Brent crude fell 23 cents or 0.4 per cent to US$51.06 a barrel. Buying interest was crimped by expectations the OPEC oil cartel will lift production at next week’s meeting.
Gold dipped as the US dollar firmed. Gold for February delivery settled $2.80 or 0.1 per cent lower at US$1,880.40 an ounce. The NYSE Arca Gold Bugs Index shed 0.9 per cent.
A broadly negative US session for mining companies saw BHP’s US-listed stock inch up 0.2 per cent, while Rio Tinto’s US-listed stock eased 0.43 per cent. Trade in London was suspended for a public holiday.
Most industrial metals climbed in Chinese trade yesterday in response to the demand implications of increased spending in the US after the passage of the stimulus bill. Copper gained 1.2 per cent on the Shanghai Futures Exchange. Nickel advanced 0.9 per cent, lead 1.4 per cent and zinc 0.4 per cent. The London Metal Exchange was closed for a holiday.
