Shares are primed to recoup some of this week's losses after a drop in US unemployment benefit claims steered the S&P 500 towards a record high overnight.
The March SPI 200 futures contract bounced 18 points or 0.4% to 5048 this morning despite further declines in Australia's big two miners in US trade as the price of iron ore slid further.
The S&P 500 closed within two points of its all-time high, rising eight points or 0.55% to 1,563 as economic data continued to deliver positive surprises. The Dow extended its best run in 16 years into a 10th night with a gain of 84 points or 0.58% for an eighth straight record close. The Nasdaq added 0.43%.
"The US economy is reasserting itself in a leadership role in terms of overall economic momentum," a senior strategist at RidgeWorth Capital Management in the US told Bloomberg. "The housing market is showing recovery, so this is all good for wealth. The decline in jobless claims suggests that the job market is continuing to improve."
The four-week average of first-time claims for unemployment benefits dropped to a five-year low after claims declined by 10,000 last week to 332,000. Economists polled by Bloomberg had predicted an increase in claims to around 350,000. Producer prices rose 0.7% last month, reflecting higher fuel prices.
Energy and tech stocks were the pick of the sectors and health care the weakest as traders continued to support stocks most exposed to economic growth. The Morgan Stanley Cyclical Index advanced 0.74%, while the VIX fell more than 4%.
Europe's benchmark share index, the Stoxx 600, rallied 1.08% to its highest point since June 2008 as European Union leaders assembled in Brussels for a summit that will include discussion of a rescue deal for Cyprus. Germany's DAX rallied 1.09%, France's CAC 0.94% and Britain's FTSE 0.73%.
BHP and Rio Tinto remained under pressure in overseas trade following another sharp decline in iron ore yesterday, but closed well off their lows in the US. Rio lost 0.87% and BHP 1.08%. Iron ore at the Chinese port of Tianjin fell 4.4% yesterday to US$132.90 a dry tonne, a level last seen in mid-December.
Copper got a leg-up from the brightening US economic news following a generally downbeat session for base metals in London. US copper for May delivery was recently up one cent or 0.3% at US$3.45 a pound. In London, copper eased 0.4%, aluminium 0.4%, lead 0.1% and zinc 0.2%. Nickel jumped 1% and tin less than 0.1%.
Oil edged to its highest settlement in roughly three weeks. West Texas Intermediate crude for April delivery was lately up 54 cents or 0.6% at US$93.06 a barrel.
Gold touched a low of US$1,575.20 before finding support in a falling US dollar. Gold for April delivery was recently down 40 cents or less than 0.1% at US$1,588 an ounce.
TRADING THEMES TODAY
RELIEF RALLY? A grim week on the ASX may find a modicum of relief today in a bright night session overseas. The old S&P 500 record has been acting as a magnet this year and drew the index ever closer last night. As for our market, it's suffering from slumping coal and iron ore prices after the recent run of economic data disappointments from China. The realisation yesterday that this rate cutting cycle may be coming to a close added another downward pressure. That said, our market is well out of alignment with Wall Street after three days of declines and should at the least stabilise today.
ECONOMIC NEWS: No significant domestic news scheduled today. European leaders continue a summit meeting tonight. Highlights of a full menu in the US include consumer inflation/core CPI, Empire State Manufacturing Index, preliminary consumer sentiment and inflation expectations, industrial production, long-term purchases and capacity utilisation rate.
