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The share market has its sights on a third straight advance after the prospect of inflation-friendly government gridlock in the US helped Wall Street start the week in buoyant form.
The S&P/ASX 200 is poised to open 24 points or 0.35 per cent higher, according to futures action. The dollar rallied more than half a percentage point to 64.8 US cents.
Commodity markets finished mixed after Chinese authorities doused speculation about loosening Covid restrictions. Oil and most industrial metals retreated. Iron ore and gold edged higher.
Wall Street
US stocks rallied for a second day as polling suggested the Republican party may gain control of the House of Representatives and possibly the Senate in tonight’s midterm elections. Investors shrugged off a production warning from Apple as China reaffirmed its commitment to zero-Covid.
The S&P 500 climbed 36 points or 0.96 per cent. The Dow Jones Industrial Average rose 424 points or 1.31 per cent. The Nasdaq Composite added 89 points or 0.85 per cent.
Stocks rose as Republican candidates gained momentum heading into tonight’s midterm elections. The GOP looked likely to regain control of the House of Representatives and perhaps the Senate, hamstringing President Joe Biden’s policy agenda. With inflation hovering near 40-year highs, investors embraced the prospect of political change that could reduce government spending.
“The likelihood that the Republicans take the House or the Senate is pretty high, therefore guaranteeing some form of gridlock over the next couple of years. That would probably take tax hikes off the table, and any sort of big spending potentially perceived as inflationary off the table,” Ross Mayfield, investment strategy analyst at Baird, said.
Inflation is a key focus this week, with October consumer price data due on Thursday. Investors will once again look for evidence this year’s explosion in inflation is softening, easing pressure on the Federal Reserve to keep raising interest rates.
Facebook owner Meta Platforms jumped 6.53 per cent following reports of wide-scale job cutting. The former tech darling has lost more than 70 per cent of its market value this year amid pressure on online ad spending.
Apple overcame early pressure after warning Covid lockdowns in China would impair iPhone production. The firm flipped an early loss into a gain of 0.42 per cent.
Australian outlook
The ASX looks poised for a third day of gains after Wall Street rallied on the prospect of reduced government spending.
“The market is hopeful that some kind of Republican sweep of Congress will lead to either a sort of stalemate in Washington, which they read as good, or at least no new spending, which would be good for rates and Treasury supply,” Brad Conger, deputy CIO at Hirtle Callaghan, said.
The S&P/ASX 200 has momentum following two days of gains. A solid advance today would bring the 7000 level back into play. Yesterday’s session was something of a fizzer after Chinese health authorities quashed speculation about a shift to looser Covid restrictions. Yet, the index still put on 0.6 per cent as a recovery in Chinese/Hong Kong shares continued.
A “risk-on” mood overnight lifted the dollar to its highest in more than a week. The Aussie was lately up 0.64 per cent to 64.8 US cents.
The night’s best-performing sectors in the US were communication services +1.83 per cent (big bounce in Facebook), energy +1.75 per cent and technology +1.64 per cent.
Also strong were industrials +1.07 per cent, health +1.07 per cent and financials +0.91 per cent. The materials sector put on 0.79 per cent. Utilities was the only major negative, falling 1.94 per cent.
A busy morning of domestic economic news includes a gauge of services-sector activity, weekly and monthly measures of consumer confidence and a measure of monthly business confidence. Reserve Bank Governor Philip Lowe is scheduled to take part in a panel discussion on inflation and policy in Zurich at 8.30 pm AEDT.
There are AGMs today for shareholders in Inghams, Bendigo and Adelaide Bank, The Lottery Corporation, Sims and Symbio Holdings.
James Hardie and News Corp releases quarterly results. OFX Group releases its interim result. Reckon trades ex-dividend.
Commodities
Iron ore shrugged off soft Chinese import figures. Customs data showed ore imports contracted 4.7 per cent last month as falling property prices dented demand for steel.
Ore imports have declined by 1.7 per cent since the start of the year, compared to the same period last year. Steel exports have fallen 1.8 per cent.
The most-traded ore contract on China’s Dalian Commodity Exchange climbed 2.1 per cent to 661.50 yuan a tonne.
BHP‘s US-traded depositary receipts eased 0.48 per cent. The miner’s UK listing dipped 0.6 per cent. Rio Tinto edged up 0.16 per cent in the US and 0.28 per cent in the UK.
Gold inched to its highest close in almost four weeks after Friday’s mixed US employment data put the US dollar under pressure. The US dollar retreated after the unemployment rate ticked higher. Overnight, the US dollar index slipped more than 0.7 per cent.
Gold for December delivery settled US$3.90 or 0.2 per cent ahead at US$1,680.50 an ounce. The NYSE Arca Gold Bugs Index firmed 1.19 per cent.
Copper and several other industrial metals gave back some of Friday’s bumper gains after China once again reaffirmed its commitment to zero-Covid, dashing reopening hopes. Against a backdrop of rising cases, health authorities said they would stick with current policy, which has led to partial lockdowns in many cities.
“Easing lockdowns ahead of winter – as China’s covid infections are rising – seems an irrational bull case for investors,” Liberum analyst Tom Price said.
Benchmark copper on the London Metal Exchange fell 1.85 per cent to US$7,949 a tonne. Aluminium dropped 1.37 per cent, nickel 1.76 per cent and zinc 1.05 per cent. Lead gained 2.4 per cent. Tin put on 3.24 per cent.
Oil declined with the prospects for China reopening next year. Brent crude settled 65 US cents or 0.7 per cent lower at US$97.92 a barrel.
Natural gas surged for a second session in the US. December gas futures climbed 8.5 per cent to US$6.944 per million British thermal units, adding to Friday’s 7 per cent rise.
