PriceSensitive

Cautious gains likely as Wall Street rises

Day Trading
25 November 2019 06:22 (AEST)

The share market looks set to open modestly higher after upbeat economic data and positive signals on trade lifted Wall Street. 

ASX SPI200 index futures edged up 12 points or almost 0.2 per cent to 6732 as BHP and Rio Tinto rose in overseas action.

US stocks ended a losing week with a mild uptick on Friday. The S&P 500 rose seven points or 0.22 per cent to pare its weekly deficit to 0.3 per cent. The loss ended a six-weekend winning run for the broadest of the major US indices. The Dow gained 109 points or 0.39 per cent on the day and the Nasdaq 14 points or 0.16 per cent.

The outlook for a trade deal with China continued to dictate market sentiment. The pendulum swung back towards optimism after Chinese president Xi Jinping and Donald Trump both reaffirmed their support as negotiations dragged on. Xi told a visiting delegation of US dignitaries, “We want to work for a Phase One agreement on the basis of mutual respect and equality.” Trump told Fox News, “We have a very good chance to make the deal.” Trump diplomatically declined to say whether he would sign a controversial US bill supporting protests in Hong Kong that has antagonised Beijing.

The market mood was also lifted by signs of improvement in the US economy. Gauges of manufacturing and services activity both touched multi-month highs during October. The manufacturing reading was the strongest since April. Consumer sentiment snapped back from a trade-fuelled dip in August – a positive sign ahead of the Christmas shopping season.

Financials and consumer stocks were the best of the sectors. Retailers were boosted by strong profit reports from Gap and Nordstrom. Tesla shares slumped 6 per cent after the carmaker unveiled a futuristic electric truck.

The ASX 200 ended a turbulent week 84 points in the red despite a 37-point rebound on Friday. Shares collapsed to a three-week low on Thursday amid negative headlines on trade, and accusations that Westpac breached anti-money laundering legislation. Several of the nation’s largest banks hit multi-month lows before steadying on Friday.

Resource stocks cushioned the local market from deeper losses last week and may provide momentum today. BHP’s US-listed stock put on 1.03 per cent on Friday night and its UK-listed stock advanced 2.39 per cent. Rio Tinto added 0.94 per cent in the US and 2.14 per cent in the UK. The gains followed a ninth straight advance in the price of iron ore. The spot price at Tianjin rose 95 cents or 1.1 per cent to $US87.80 a dry ton.

Oil pulled back as traders took profits at a two-month high. Brent crude settled 58 cents or 0.9 per cent lower at $US63.39 a barrel. Crude surged earlier in the week on reports that OPEC and its allies will extend production caps to support prices.

Industrial metals rallied on hopes for the elusive US-China trade deal. Benchmark copper on the London Metal Exchange rose 0.5 per cent. Aluminium gained 0.3 per cent, lead 0.4 per cent and zinc 0.5 per cent. Nickel was bid up 0.7 per cent in closing rings. Tin slid 0.5 per cent

Gold closed flat at the end of a mildly negative week. December gold settled unchanged on Friday at $US1,463.60 an ounce as early gains faded. The precious metal lost 0.3 per cent over the week.  

The dollar started the week a tenth of a cent higher at 67.93 US cents.

Trade talks and the fallout from Westpac’s alleged compliance failures are likely to set the market tone for much of the week ahead. Other potential market-movers include a speech on monetary policy tomorrow from RBA Governor Phil Lowe, quarterly construction data on Wednesday and quarterly private business spending on Thursday. The week ahead on Wall Street starts light and picks up with consumer confidence tomorrow night and durable goods orders on Wednesday night.

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