Shares are likely to open modestly higher after a late surge on Wall Street on Friday was partly offset by weakness in key commodities.
The June SPI 200 futures contract rallied nine points or 0.2% to 5216 on Saturday morning as final-hour charges secured record closes on the Dow and S&P 500. US dollar-denominated commodities came under selling pressure before recouping some of their losses as the greenback came off its intraday high.
The S&P 500 locked in a third week of gains with a rise of seven points or 0.45% on Friday. The Dow rallied 35 points or 0.23% for another record-high close. The Nasdaq put on 0.82%.
"The party continues," the chief investment officer at Wilmington Trust Investment Advisors in the US told Bloomberg. "The US seems to be doing fine. Earnings are supportive of the equity market. We've got the Fed and central banks that are supportive. We're in this low-interest-rate, low-inflation environment, and that's pretty good for equities."
Health care and consumer discretionary stocks led the rally after clothing chain Gap exceeded profit projections. Risk sentiment remained strong, with cyclical and small-cap indices all rising by more than 0.5%.
Energy was the worst-performing sector as a resurgent US dollar weighed on oil and other commodities. The Thomson Reuters-Jefferies CRB commodities index fell roughly 1%, with several components falling at least 2%, including gold, coffee and several grains. West Texas Intermediate crude oil for June delivery fell as low as US$93.37 a barrel before paring its decline to 42 cents or 0.4% at US$95.97.
Gold was squeezed by the rising dollar and further selling by exchange-traded funds. June gold fell $21.40 or 1.5% to US$1,447.20 an ounce for a weekly loss of about 2% after hitting a session low of US$1,420.60. Data showed gold holdings in the largest US gold-backed exchange-traded fund declined about about 15 metric tons last week.
A late rally in US copper helped offset a negative night on the London Metal Exchange. US copper for July delivery bounced about four cents or 1.3% to US$3.38 a pound. Earlier in London, copper dipped 1.2%, aluminium 1.8%, lead 1.9%, nickel 0.2%, tin 0.1% and zinc 1.2%. ME Alum 1856.25 -34.75 -1.84 2073.00 -10.46
Further signs of improvement in the German economy helped most major European markets rally to new highs for the year. Germany's DAX advanced 0.2% to a new all-time closing high after March trade data showed both imports and exports rose by at least 0.5%. France's CAC put on 0.65% and Britain's FTSE added 0.49%.
TRADING THEMES THIS WEEK
CHINA UPDATE: Our market faces an awkward late hurdle this afternoon with the 3.30pm EST release of Chinese industrial production, retail sales and fixed asset investment figures for April. All three readings are expected to show incremental improvements from the previous month. Still, the timing doesn't allow the local market much time to deliver a considered response to the data.
DOLLAR DECLINE: The Australian dollar opened just above parity with the greenback this morning, recently buying US$1.0014. Currency differences have had a major impact on the relative performance of share markets around the world, so the recent decline of the Aussie has implications for the overall strength of the ASX and also specific stocks, especially exporters and importers. The Aussie lost roughly three US cents last week - a big move by forex standards - putting it squarely in the spotlight this week.
BUDGET: Treasurer Wayne Swan is due to hand down his sixth federal budget tomorrow night with a return to surplus apparently pushed out by three or four years. Most of the major policy changes have been well flagged by now, but the possibility of surprises will likely be a dampener on the ASX until Wednesday morning.
ECONOMIC NEWS: The federal budget at 7.30pm EST tomorrow night is the highlight of a light week for domestic news. Also happening: monthly home loans, business confidence (11.30am today); and wage price index and vehicle sales (Wed). US highlights this week include: retail sales/core retail sales (tonight); producer price index/core PPI, Empire State Manufacturing Index, industrial production (Wed); building permits, consumer price index/core CPI, weekly benefits claims, housing starts, Philly Fed Manufacturing Index (Thu); and consumer sentiment (Fri).
