Market wrap: Stocks are set to recover most of yesterday's losses at today's open after solid U.S. company earnings and a weak greenback helped Wall Street rebound overnight.
The December SPI futures contract this morning rallied 24 points or 0.5% to 4656 as Wall Street resumed its up-trend and resource prices turned higher.
The Dow led gains on the major indexes, rising 129 points or 1.18% after well-received profit reports from Boeing, Merck and Pfizer. The S&P 500 added 1.05% as resource stocks responded to improving commodity prices, while the Nasdaq put on 0.84%.
The U.S. dollar broke its three-day winning run against the euro as traders put U.S. mortgage woes and China's surprise rate rise behind them and turned once again to the prospect of further quantitative easing. The release of the Federal Reserve's "Beige Book", a regional business survey, confirmed the likelihood of further efforts to stimulate a sluggish economy.
"The Beige Book reiterates the call for quantitative easing," the chief investment officer at Harris Private Bank in the U.S. told Bloomberg. "The economy is growing, just not accelerating. It remains to be seen what ultimately the Fed buying of bonds will do. For now, we get stock investors reacting positively to that."
The U.S. dollar index, which tracks the greenback against six major currencies, gave back most of yesterday's gains as the dollar hit a 15-year low against the yen. The index was recently off 1.2% at 77.22.
Oil was helped by a smaller rise in U.S. inventories than analysts expected. Crude futures rallied $2.26 or 2.8% to $82.42 a barrel, recovering more than half of yesterday's fall, the biggest in eight months.
Metals also staged modest recoveries from yesterday's heavy losses. December silver rallied 8 cents or 0.4% to $23.86 an ounce. The spot gold price was $9.60 higher than Tuesday's New York close at $1,344.10 an ounce.
Industrial metals rebounded as analysts re-assessed the likely impact of China's rate hike. In late trade in London, copper was up 1%, aluminium 0.3%, lead 2.3%, nickel 2.1%, tin 3.5% and zinc 2.3%.
"Although the Chinese rate announcement is undoubtedly a new variable to contend with, we do not think it is a significant 'game changer', for metals," a senior commodity analyst at MF Global told Reuters. "As emerging markets hike interest rates to control runaway growth and fight off inflationary pressures, the [U.S.] dollar should come under renewed pressure... and so should keep the commodity complex well bid."
The major European markets advanced. Britain's FTSE rallied 0.44%, Germany's DAX 0.52% and France's CAC 0.55%.
TRADING THEMES TODAY
BOUNCE: It was back to business-as-usual overnight - the U.S. dollar resumed its downtrend and equities and commodity prices rallied. It's scary how quickly this market forgets what spooked it the previous session, but you gotta trade what's in front of you and this remains a buy-the-dips market. For now, all Wall Street cares about is the prospect of the Fed printing more money. Our market is not as manic-depressive as the U.S. - its mood swings are less volatile. It didn't capitulate yesterday, so it doesn't have as far to rebound today.
CHINA UPDATE: Today brings the monthly economic update from our major trading partner. This week's unexpected interest rate rise suggests the economy is still storming along, which may raise expectations for today's data, which includes GDP, CPI, PPI, industrial production and retail sales. The numbers hit trading screens at 1 pm but it usually takes the market some time to digest and respond.
ECONOMIC NEWS: There's nothing significant scheduled locally today but all eyes will be on the market's response to the monthly update from China (see above). The schedule tonight in the U.S. includes unemployment claims, regional manufacturing, the leading index and natural gas storage.
