Aussie shares will shoot for a fifth straight advance after Wall Street eked out a record close as the Federal Reserve reiterated its commitment to support the recovery with easy monetary policy.
ASX futures climbed 36 points or 0.52 per cent. The S&P/ASX 200 yesterday claimed its first four-session winning run since early December, rallying 42 points or 0.61 per cent to a 14-month closing high.
Wall Street
US stocks finished mixed but little changed overnight as the Fed stuck to a familiar script: no policy change until the committee sees substantial improvement in the economy.
The S&P 500 edged up six points or 0.15 per cent to a new record close. The Dow Jones Industrial Average added 16 points or 0.05 per cent. The Nasdaq Composite dipped nine points or 0.07 per cent as bond yields ticked higher in the wake of the minutes of the last Fed meeting.
The Fed said it saw substantial improvements in the economy but would not raise rates or curtail stimulus spending until the economy met its goals. The central bank’s targets include full employment and inflation above 2 per cent. The minutes said policy would be directed by “observed outcomes rather than forecasts”.
“Participants noted that it would likely be some time until substantial further progress toward the Committee’s maximum-employment and price-stability goals would be realized and that, consistent with the Committee’s outcome-based guidance, asset purchases would continue at least at the current pace until then,” the minutes said.
Optimism over the near-term economic outlook was underlined by JPMorgan Chase Chairman and CEO Jamie Dimon’s annual letter to shareholders.
“I have little doubt that with excess savings, new stimulus savings, huge deficit spending, more QE, a new potential infrastructure bill, a successful vaccine and euphoria around the end of the pandemic, the U.S. economy will likely boom,” Dimon wrote. “This boom could easily run into 2023 because all the spending could extend well into 2023.”
Cruise lines were boosted by news of a resurgence in bookings at Carnival. Shares in the company gained 1.4 per cent. Norwegian added 0.7 per cent and Royal Caribbean 0.3 per cent. United Airlines edged up 0.15 per cent.
Australian outlook
The local market has blue skies overhead as inflation concerns continue to dissipate. This morning’s open should carry the index well beyond the old pandemic-era peak of 6938 set back in February.
Five-session win streaks are infrequent, but not rare. The last came in early December when the index rose for seven straight sessions. There may be some “round number” resistance at 7000, but the all-time high at 7197 suddenly seems tantalisingly close – less than 4 per cent from yesterday’s finishing level.
The big banks may do the heavy lifting today. The US financial sector gained 0.4 per cent. The energy sector added 0.4 per cent as crude rebounded. Tech stocks put on 0.5 per cent despite the dip in the Nasdaq Composite.
Mining stocks may drag after the US materials sector slumped 1.75 per cent following declines in metals. However, strengthening iron ore prices provided a cushion for BHP and Rio Tinto (see below).
The economic calendar is empty this session. Scentre Group holds its AGM.
The dollar retreated 0.64 per cent to 76.12 US cents.
Commodities
Record steel prices in China ensured iron ore was well supported. The spot price for ore landed in China rose $2.05 or 1.2 per cent yesterday to US$172.90 a tonne. BHP’s US-listed stock put on 1.83 per cent and its UK-listed stock 2.12 per cent. Rio Tinto added 1.57 per cent in the US and 2.06 per cent in the UK.
A decline in US stockpiles helped oil shake off early weakness. Brent crude settled 42 cents or 0.7 per cent ahead at US$63.16 a barrel after data showed US crude inventories declined by three million barrels last week.
Gold dipped to its first loss in five sessions. Gold for June delivery settled $1.40 or almost 0.1 per cent lower at US$1,741.60 an ounce. The NYSE Arca Gold Bugs Index shed 1.6 per cent.
An increase in warehouse inventories dragged copper off a two-week high. Benchmark copper on the London Metal Exchange sagged 1.5 per cent to US$8,919 a tonne. Aluminium dropped 0.4 per cent, nickel 0.6 per cent and tin 0.1 per cent. Lead gained 1.3 per cent and zinc 0.2 per cent.
Copper “stocks have almost doubled since the lows in February. That’s not a good sign in supporting the narrative around any immediate deficit,” ING analyst Wenyu Yao told Reuters.