Aussie shares were poised to open modestly higher following solid gains on European markets while Wall Street was closed for Thanksgiving.
Europe’s main stock benchmark closed at a three-month high. Also helping sentiment here were advances in iron ore, copper and US equity futures.
ASX futures edged up 12 points or 0.17 per cent in light, holiday-affected trade. A third day of gains lifted the S&P/ASX 200 to a six-month closing high yesterday.
Europe/Wall Street
Europe’s leading stock index rose for a third night as investors welcomed indications the US Federal Reserve was ready to slow this year’s aggressive pace of interest rate increases. The pan-European Stoxx 600 climbed 0.46 per cent.
Germany’s DAX index gained 0.78 per cent. France’s CAC 40 index added 0.42 per cent. Britain’s FTSE 100 index inched up 0.02 per cent.
European markets played catch-up with solid gains on Wall Street on Wednesday after the conclusion of the European session. US stocks rallied late in the day after the latest Fed minutes indicated a “substantial majority” of committee members favoured a slowdown after four consecutive rate hikes of 75 basis points.
“The Fed’s new monetary policy stance is good for the US equity market,” Naeem Aslam, chief market analyst at AVATrade, said.
“The fact that it seems like we are near enough the top of reaching the interest rate peak, the coming months and the year could be good for the US stock market as bulls are likely to feel more confident.”
The European real estate sector rose 2.5 per cent as the cost of long-term borrowing declined. Chemicals was another standout.
Buying interest was supported by a rebound in German business morale. The closely-watched Ifo business climate index rose to 86.3 from a reading of 84.5 in October despite the prospect of a recession next year as European rates rise.
“The recession could prove less severe than many had expected,” the Ifo institute said.
The minutes from last month’s European Central Bank meeting showed policymakers believe interest rates will need to rise further to avoid inflation becoming entrenched. The ECB raised its benchmark rate by 75 bp to 1.5 per cent in October.
“We currently expect the ECB to hike rates by 50bp in December and by another 25bp in February,” Carsten Brzeski, global head of macro at ING, said.
US equity futures remained positive this morning. S&P 500 futures were ahead 10.5 points or 0.26 per cent. Dow futures firmed 45 points or 0.13 per cent. Nasdaq futures rallied 48.5 points or 0.41 per cent.
Australian outlook
Barring black swans, a constructive week looks likely to end with another day of modest progress and a fresh six-month high. European markets kept the ‘Fed rates slowdown’ party going overnight. US futures remained positive ahead of a shortened session tonight.
Rebounds in iron ore and copper could also help here. Index heavyweights BHP and Rio Tinto rose in UK trade. Oil and gold showed minimal change since yesterday’s ASX close.
The S&P/ASX 200 continued to grind higher yesterday, gaining 10 points or 0.14 per cent on below-average volume. Participation rates are likely to be light again this session while Wall Street enjoys its turkey.
The market appears untroubled so far by China’s Covid struggles. Daily infection rates hit a record yesterday of more than 31,000 new cases. Notably, almost 90 per cent of cases in recent days were asymptomatic.
The dollar continued to benefit from expectations US rates may not rise as fast or as high as previously projected. The Aussie firmed 0.32 per cent this morning to 67.67 US cents.
A big week of AGMs winds up with meetings today for shareholders in EML Payments, Silver Lake Resources, Regional Express, Westgold and Beston Global Food Co.
There is nothing significant on the domestic economic calendar today as a slow week winds down.
Commodities
Iron ore rallied for the first time in four sessions after three of China’s largest commercial banks announced billions of dollars in new credit lines for developers. The co-ordinated support was the latest government-backed measure to restore confidence in the nation’s ailing property market. Major developments around the country had stalled as developers struggled to access cash.
The most-traded January ore on the Dalian Commodity Exchange bounced 1.3 per cent to 732.0 yuan (US$102.36) a tonne.
The China news helped copper and some other industrial metals rise on the London Metal Exchange. Benchmark LME copper firmed 0.23 per cent to US$8,023.50 a tonne. Nickel gained 0.35 per cent, lead 1.23 per cent and tin 1.69 per cent. Aluminium dropped 1.2 per cent and zinc 0.1 per cent.
“Metals are higher from Chinese banks’ pledge for loans and interest-free terms to other banks for re-lending to developers,” a Singapore-based metals trader told Reuters.
BHP‘s UK-traded stock advanced 0.72 per cent. Rio Tinto gained 0.54 per cent in UK trade.
Oil closed near a two-month low as a build-up in US gasoline stockpiles and the spread of Covid restrictions in China dulled demand.
Traders also awaited the outcome of contentious G7 talks about a price cap for Russian crude. European governments have been unable to agree on a price that would impede Russia’s ability to fund its war in Ukraine without driving global prices sharply higher.
Brent crude settled seven US cents or 0.1 per cent lower at US$85.34 a barrel. Volumes were thin with the US closed for Thanksgiving.
Gold retained most of Thursday’s gains, which came as the US dollar responded to indications the Federal Reserve was open to smaller interest rate hikes from next month. Precious metals have fallen sharply this year as improving bond yields and a strengthening greenback dull buying interest in alternative stores of wealth.
The yellow metal was this morning up US$10 or 0.67 per cent at US$1,755.60 an ounce.