Market wrap: Local index futures point to a positive start to the trading day after yesterday's surge to an 11-month high.
With 30 minutes left to trade, the SPI futures index was up 10 points at 4537 after solid advances on global equity and commodity markets. In the US, the S&P 500 put on 0.88%, the Dow 0.59% and the Nasdaq 0.94%, led by energy and materials stocks. Earlier, key European markets eked out modest gains of 0.22 - 0.33%.
Trading volumes in the States improved as traders returned to their desks from the northern summer break. Last night's gains after Kraft's bid for Cadbury on Monday provided the third winning session in a row.
Gold provided much of the action as futures smashed through the US$1000 mark but couldn't hold those heights. The September contract rose as high as $1,006.90 an ounce in US trade, the highest level for a nearby futures contract since March 2008, but ended at $997.90, up $3, or 0.3%. The spot gold price has recently retreated to $994.10.
Weakness in the US dollar also helped crude oil futures break out of their recent tight trading range. Oil surged 4.5% to $71.30 as traders bet that tonight's OPEC meeting will leave production levels unchanged.
The focus on commodities and US dollar weakness helped base metals. Also helping sentiment in the sector: Goldman Sachs raised its forecasts for most industrial metals prices. Lead and zinc continued to set the pace, rising to new 2009 highs. Copper pushed towards the old high, there was some relief for aluminium but nickel remains the laggard of the group.
TRADING THEMES TODAY
OIL: After consolidating for four sessions, oil futures made a decisive break north last night. Tonight's OPEC meeting will set the tone for the next few weeks but last night's action suggest traders are bullish. Any local oiler that has retraced over the last week will be worth a look today.
METALS: There's a significant divergence in the relative performance of base and precious metals at present, with gold, silver, lead and zinc setting the pace, copper and platinum playing catch-up and aluminium and nickel lagging behind. It pays to focus on the hottest sectors.
CONSOLIDATION? Last night's gains happened in key sectors for the Australian market - energy and mining - suggesting a very strong day ahead. However, our market pre-empted much of the action with yesterday's break to a new 2009 high and may take a breather today to consolidate those gains.
