Market wrap: Australian stocks will open higher this morning after a bounce in oversold overseas equities and commodity prices.
Futures traders expect our market to open 46 points ahead of yesterday's close after Wall Street surged back overnight from last week's steep decline. The March SPI futures contract closed at 4555 after an up-kick in global manufacturing, strong earnings from Exxon and a bullish outlook for U.S. coal stocks.
The S&P 500 rallied 1.43%, the Dow 1.18% - its biggest one-day gain since early January - and the Nasdaq 1.11%. Exxon rose nearly 3% after its fourth-quarter earnings beat analysts' expectations. There were also significant gains for U.S. coal miners after analysts at Davenport & Co released a rosy outlook for the sector.
Manufacturing firms grew at a strong pace in January, according to a closely followed survey. The Institute for Supply Management index hit 58.4%, well above the 56% expected by economists. Other data was less positive. Construction spending fell much more than expected in December and personal spending rose just 0.2%, less than economists predicted.
Analysts said they hoped last night's performance marked a turnaround after January's dismal performance. "The market today has stopped over-riding good earnings and economic data, which is good to see," a portfolio manager told MarketWatch. "Hopefully, this means the correction has run its course."
A 0.3% decline in the U.S. dollar index helped commodity prices. A cold snap in the U.S. helped crude oil futures rally 2.7% to $74.86 a barrel after several weeks of steady decline.
Upbeat manufacturing data from Europe and China as well as the U.S. brought gold back into vogue as a hedge against inflation. The spot price charged nearly 2.5% to trade recently at $1,106 an ounce. In response, an index of U.S. precious metals miners leaped 5.5%. Oilers and natural gas companies also recovered much of last week's lost ground.
The fall in the U.S. dollar came too late to boost all industrial metals but copper bounced off an 11-week low. In London, copper rose 0.7%, aluminium was flat, lead added 1.25%, nickel fell 3%, tin plunged 6.7% but zinc rose 1.7%.
The major European markets shook off early weakness to close higher. Britain's FTSE gained 1.14%, Germany's DAX 0.81% and France's CAC 0.6%.
TRADING THEMES TODAY
BOUNCE: The local market looks oversold short-term but that modest rise in futures suggests some caution ahead of this afternoon's interest rate announcement (see below). I'm wary about buying the open and I would consider using any big opens to off-load overnight holds at a profit. I'm thinking we could see a decent open, then a fade towards 2.30, followed by a rally irrespective of what the RBA announces.
INTEREST RATES: Today's trade will be overshadowed by the prospect of a record fourth straight interest rate rise when the Reserve Bank releases its verdict at 2.30 this afternoon. The market will likely have factored in the worst by then. The announcement will be posted here at 2.30 pm sharp: http://www.rba.gov.au/
ECONOMIC NEWS: The interest rate announcement at 2.30 pm is the main event locally. Also today: NAB's business confidence survey at 11.30 am. Tonight in the US: home and vehicle sales.
