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The share market was poised to build on a seven-week high after strong jobs data lifted US stocks for a seventh session, and the White House’s infrastructure bill was passed by Congress.
ASX futures rallied 22 points or 0.3 per cent. On Friday, the S&P/ASX 200 climbed 29 points or 0.4 per cent to its highest close since mid-September.
A big week of annual general meetings includes updates from BHP, Fortescue Metals, Coles, Newcrest and Nine Entertainment.
Wall Street
US stocks extended their record run after October employment figures underlined the strength of the economy and Pfizer announced a breakthrough in treating Covid-19. The House of Representatives later passed President Joe Biden’s trillion-dollar infrastructure spending package, clearing the way for the bill to be signed into law.
The S&P 500 climbed 17 points 0.37 or per cent to a seventh straight record. The Dow Jones Industrial Average put on 204 points or 0.56 per cent. The Nasdaq Composite added 31 points or 0.2 per cent.
Concerns about the economic hit from the Delta wave were soothed by a strong rebound in the labour market last month and upward revisions to previous months. The economy created 531,000 jobs last month, ahead of the Dow Jones estimate of 450,000. Soft September and August tallies were both revised significantly higher.
“The labor market recovery is back on track, but it will still take several months to get to maximum employment,” Edward Moya, senior market analyst at Oanda, said. “Alongside the Pfizer COVID pill news, this strong report should ease some of the supply chain problems and that will make some investors embrace the reopening trade.”
“Reopening stocks” surged after Pfizer reported its Covid-19 pill in combination with an HIV drug reduced hospitalisations by 89 per cent. The S&P 1500 airlines index gained 7.01 per cent. Cruise lines put on 7-8 per cent. Hotel groups and casinos also advanced.
“Still early to be definitive but this looks like a true game changer for many industries like leisure and transportation, you’re seeing it reflected in the prices,” Andre Bakhos, managing director at New Vines Capital, told Reuters.
Pfizer shares jumped 10.86 per cent. Rivals Merck and Moderna tanked 9.86 and 16.56 per cent, respectively.
Friday’s gains rounded off a strong week for equities. The S&P 500 gained 2 per cent, extending its tally for the year to 25 per cent. The Nasdaq had its best week since April, rising 3.1 per cent. The Dow added 1.4 per cent.
Small caps kept pace. The Russell 2000 index rallied 1.44 per cent to a record close.
Australian outlook
A new week looks set for a bright start after Wall Street cheered evidence that the Delta jobs dip is passing and the hit to labour markets was never as heavy as previous estimates suggested. Pfizer’s Covid pill looks like another important step towards ending the pandemic. The passage of President Biden’s US$1.75 trillion infrastructure bill late on Friday night US time will also have an impact both here and on US equity futures.
The S&P/ASX 200 should open at a fresh seven-week high. A strong session today would bring the 7500 level into play – perhaps even the 7550 resistance level where the market stalled repeatedly in late August/early September. Beyond that, the path looks clear to the old August market peak.
Energy was the pick of the US sectors, rising 1.42 per cent following a sharp rebound in crude. Also strong were industrials +0.99 per cent, utilities +0.89 per cent and materials +0.84 per cent. Gold miners should benefit from the precious metal’s highest close since early September.
Financials were held back by a drop in lending rates, adding less than 0.1 per cent. Health was the only loser, falling 1.03 per cent thanks to declines in Merck and Moderna.
Thursday’s October jobs report looms as this week’s most significant economic release. Economists expect the jobless rate ticked higher under lockdown from 4.6 to 4.8 per cent as the economy created around 50,000 jobs. Any jobs growth would be an improvement after two months of six-digit declines.
Other potential highlights this week include: business confidence (Tuesday); consumer sentiment (Wednesday); and inflation expectations (Thursday).
Overseas, Federal Reserve Chair Jerome Powell will be busy selling the message the economy is strong enough for the central bank to reduce support, but not ready for a rate hike. Powell addresses an online conference tonight and tomorrow night. Other US highlights include: producer prices (Tuesday); and consumer prices (Wednesday). Third-quarter corporate earnings will continue to trickle in.
The domestic AGM season continues with meetings tomorrow for shareholders in Fortescue Metals, Bendigo and Adelaide Bank and MNF Group. Wednesday: Coles, Newcrest, Beach Energy, Contact Energy, Sims, Vicinity Centres and Shaver Shop.
Thursday: BHP, Nine Entertainment, Ansell, Computershare, Nearmap, Austal, Breville, Estia Health, Qube, REA Group, Ingenia Communities and Cooper Energy. Friday: LendLease and Adore Beauty. (Source: ASA.)
IPOs: the pipeline of new listings slows dramatically this week, but the week starts with a big one. Hotel booking software platform SiteMinder lists today at 11 am AEDT. The company operates in 150 countries and looks poised to achieve unicorn status upon listing with a valuation of more than $1 billion.
The rest of the week looks like this: Dundas Minerals (Tuesday); Green Technology Metals (Wednesday); and Cosmos Exploration (Thursday).
The dollar firmed 0.19 per cent this morning to 73.94 US cents.
Commodities
Iron ore doubled its loss for the week after data showed Chinese steel production caps continued to undermine output. Capacity utilisation rates at steel mills declined to 62.4 per cent last week from 66.17 per cent the previous week, according to Mysteel data. Consumption declined by 2.3 per cent.
The spot price for ore landed at Tianjin sagged US$6.95 or 7 per cent to US$92.75 a tonne. For the week, the spot price shed US$14 or 13.1 per cent.
BHP and Rio Tinto were mixed in overseas trade. BHP, which is less dependent on iron ore, bounced 0.45 per cent in the US and 0.6 per cent in the UK. Rio Tinto’s US-listed stock eased 0.39 per cent and its UK-listed stock 0.25 per cent.
Gold logged its highest finish since early September ahead of what are expected to be strong inflation data this week. Precious metals have been traditionally used as hedges in times of strong inflation. Metal for December delivery settled US$23.30 or 1.3 per cent ahead at US$1,816.80 an ounce. The NYSE Arca Gold Bugs Index rose 3.17 per cent.
Oil rebounded from a four-week low, but not by enough to avoid a second straight weekly decline. Brent crude settled US$2.20 or 2.7 per cent higher at US$82.74 a barrel. For the week, Brent eased 1.2 per cent.
Aluminium hit a three-month low on the London Metal Exchange before recovering to finish flat. Prices have plunged from recent highs after China increased coal production, allowing smelters to reopen. Benchmark aluminium on the LME ended steady at US$2,533 a tonne after trading as low as US$2,510.
Copper improved 0.6 per cent, nickel 1.5 per cent and tin 1.7 per cent. Lead shed 0.1 per cent and zinc 0.5 per cent.
