Shares are set to catapult higher at today's open following a milestone night on Wall Street and a surge in industrial metals on Friday.
The June SPI 200 futures contract rallied 56 points or 1.1% to 5183 on expectations that the ASX 200 will start the week within reach of a new four-and-a-half-year peak.
US stocks hit record levels after unexpectedly strong job gains last month pushed the unemployment rate down to its lowest point in four years. The S&P 500 put on 16 points or 1.03% to break 1,600 for the first time, closing at 1,614. The Dow breached 15,000 for the first time, touching 15,009 before fading to a record close of 14,974 and a daily gain of 142 points and 0.96%.
The jobless rate declined to 7.5% from 7.6% after the US economy gained 165,000 jobs last month and data for February and March were revised upwards. The revisions collectively added another 114,000 positions to the employment count and helped soothe investor fears that the recovery was stalling after a recent run of weak data.
"This is an outstanding jobs report," the regional chief investment officer at Wells Fargo Private Bank in the US told Bloomberg. "The data is strong enough to confirm that the expansion is intact, and the bones of this recovery are where they need to be."
Overshadowed by the jobs euphoria, other reports were less positive. Factory orders declined 4% in March and a gauge of the services activity slowed to 53.1 in April from 54.4 in March.
Commodity and industrial stocks led the advance as traders favoured stocks best exposed to an economic upswing. The Morgan Stanley Cyclical Index jumped 2.04%, Dow Jones Transportation Average 2.05% and Russell 2000 index of small caps 1.55% to a record high. BHP leaped 2.86% in US action. Rio Tinto put on 4.22%.
The London Metal Exchange saw a boom session as base metals finally played catch-up with the recent rebounds in oil and precious metals. Copper spurted more than 6%, its biggest rise in 18 months as short-sellers covered positions following the US jobs report. US copper for July delivery bounced 20 cents or 6.5% to US$3.31 a pound. In London, copper advanced 6.1%, aluminium 3.9%, lead 5%, nickel 3.6%, tin 3.9% and zinc 3.6%.
"Base metals are seeing a wave of short covering here on the back of non-farm payrolls - copper is leading the way," a metals trader told Reuters.
Oil saw its highest price in a month amid relief that the US recovery appeared to be intact. West Texas Intermediate crude oil for June delivery climbed $1.62 or 1.7% to US$95.61 a barrel.
Gold settled modestly lower but recovered that loss by the end of the session. Gold for June delivery settled at US$1,464.20 an ounce in the US, a loss of $3.40 or 0.2%, before bouncing to a closing gain of $2.90 or 0.2% at US$1,470.50.
Germany's benchmark share index hit an all-time high as European markets caught an afternoon leg-up from the US payrolls news. The DAX rallied 2.01%, France's CAC 1.41% and Britain's FTSE 0.93%.
TRADING THEMES THIS WEEK
RATE MEETING: The highlight of a big week of domestic data is tomorrow's Reserve Bank policy meeting, which could see the the overnight cash rate cut to 2.75% from 3%. The market has the odds on a cut running at 57%, according to Credit Suisse. Economists are less positive, with a majority of those polled by Bloomberg anticipating no change. That creates the conditions for a big share-market move either way at 2.30pm EST tomorrow. Other potential market-moving news this week includes: retail sales (today); trade balance (tomorrow); monthly employment report, NAB's first-half earnings (Thu); and an RBA monetary policy statement (Fri). See more below.
CHINA SLOWDOWN: While the economic outlook for the US suddenly seems brighter, the jury is still out on our other major trading lead. Trade figures from China are due on Wednesday and inflation data on Thursday. US data is especially light this week, creating a vacuum that will give added weight to other data.
SPEC REVIVAL: Barring surprises this week, conditions appear supportive for a revival of interest in the speculative end of the market after a rocky couple of months. Buying interest began to return last week with strong runs in the likes of ADN, GDY and PUN. Weekend news of market milestones in the US should add to the interest this week. A fresh four-and-a-half-year high on the ASX, perhaps as early as today, would also help.
ECONOMIC NEWS: A heavy domestic schedule this week includes: inflation gauge (10.30am EST), retail sales and jobs ads (11.30am, all today); construction index, trade balance, house price index, Reserve Bank rate decision and statement (tomorrow); employment change, unemployment rate (Thu); and RBA Monetary Policy Statement (Fri). A thin week in the US has nothing but second-tier economic releases until Thursday's weekly jobless claims and then a speech by Federal Reserve Chairman Ben Bernanke on bank structure and competition on Friday.
