A record-breaking night on the Dow has Australian shares poised to extend yesterday's gains following further signs of improvement in the US economy.
The March SPI 200 futures contract rallied 20 points or 0.4% stronger to 5099 as the US's blue-chip index hit an all-time high and oil and most metals rebounded.
The Dow surged 126 points or 0.89% to 14,254, finally surpassing the record close of 14,164 set on October 9 2007 before the GFC broke. The S&P 500 put on 0.97% to draw within 2% of its highest point and the Nasdaq added 1.32%.
"People are now starting to realise that it is a bull market," the president of Birinyi Associates in the US told Bloomberg. "It's not going to come back, you've missed the train, and the train still has a long way to go. But you better get on it."
All 10 industry groups in the S&P 500 advanced as traders anticipated the continuation of the Federal Reserve's stimulus program and after China yesterday pledged to maintain annual growth targets. The Chinese government yesterday said it will increase spending by 10% to maintain growth at 7.5% this year. The news helped the Shanghai Composite rebound 2.31% yesterday.
The Morgan Stanley Cyclical Index of companies most leveraged to economic growth rallied 1.36% after services activity hit its highest level in a year. The Institute for Supply Management service index improved to 56% last month from 55.2% in January, its 39th straight month of expansion.
Australia's big two miners rallied in US trade despite another drop in the price of iron ore yesterday. BHP gained 0.8% and Rio Tinto added 2.32%. The Metal Bulletin Iron Ore Index yesterday declined $1.22 to US$147.03 a tonne.
The Stoxx Europe 600 index hit its highest level in four and a half years after a euro-zone composite manufacturing/services index was revised upwards and retail sales increased more than expected. The Markit composite PMI for February was revised to 47.9 from an initial reading of 47.3. January retail sales were up 1.2%. Germany's benchmark share index, the DAX, jumped 2.32%, France's CAC 2.08% and Britain's FTSE 1.36%.
The combination of improved economic signals from China, Europe and the US helped oil rally off its lowest level of the year. West Texas crude for April delivery was lately up 66 cents or 0.7% at US$90.77 a barrel.
China's growth pledge helped steady industrial metals markets after a wobbly couple of weeks. US copper for May delivery was recently up two cents or 0.6% at US$3.52 a pound. In London, copper put on 0.5%, aluminium 0.2%, lead 0.5%, nickel 1.2%, tin 0.4% and zinc 0.3%.
A rebound in gold was constrained by strong US services data and a prediction by Bank of America Merrill Lynch that the metal will not see US$2,000 this year. Gold for delivery in April was recently ahead $2.10 or 0.1% at US$1,574.50 an ounce after earlier running as high as US$1,585.80.
TRADING THEMES TODAY
BOUNCE CONTINUES: So there it is, more than five years late: the record high on the Dow we were expecting on October 10, 2007. And we complain about Sydney's public transport. Our market pre-empted most of the rise yesterday and therefore likely doesn't have as much to gain today. Still, a four-and-a-half-year high might be within reach if the 11.30am EST GDP report surprises to the upside. Oil and metals stabilised overnight, but iron ore continued to weaken yesterday amid an increasingly bearish mood in that market.
GDP: Today's potential intraday market-mover is the fourth-quarter GDP report due at 11.30am EST. Economists polled by AAP expect the report to reveal the economy accelerated during the last three months of the year to a growth rate of 0.7% from 0.5% the previous quarter. That would equate to annul growth of 3.1%. A result either side of those figures has the capacity to push the market one way or the other.
ECONOMIC NEWS: GDP data are due at 11.30am EST (see above). Europe has revised GDP figures due tonight. Highlights in the US include: non-farm employment change, the Federal Reserve's Beige Book, factory orders and crude oil inventories.
