Market wrap: Australian stocks are primed to open at a one-month high after a sixth night of gains for global equities and a strong session for oil and metals.
The June SPI futures contract closed 68 points ahead at 4590, suggesting the share market will start the session around 1.5% higher than yesterday's close.
Wall Street's major indices surged more than 2% overnight after robust New York manufacturing data reassured investors that the U.S. is weathering the European debt crisis. The MSCI World Index of equities recorded its sixth straight gain - its longest rally since October - and the U.S.'s benchmark S&P 500 broke back above its 200-day moving average, sparking fresh technical buying.
The S&P 500 closed 2.35% higher, the Dow put on 214 points or 2.1% and the Nasdaq 2.76%.
"The panic from the euro-zone crisis has abated, with the likes of Spain and Ireland able to successfully tap the credit markets, supporting a move into riskier assets," according to analysts at Action Economics quoted on MarketWatch.
U.S. investors were cheered by two pieces of economic news: the Federal Reserve Bank of New York's economic index marked its 11th straight month of growth and a government report showed costs of imported goods fell in May, relieving pressure on the Federal Reserve to increase the cash rate from its record low.
"Inflation remains subdued, suggesting the Fed will remain on the sidelines," the head of wealth management research for the Americas at UBS told Bloomberg. "We've moved from recession to recovery and now we're moving into expansion," he added.
The euro held above US$1.23, raising hopes that the worst of the European debt crisis is over. The dollar index, which measures the U.S. currency against six major currencies, was recently down 0.56% as so-called safe-haven buying abated and risk appetite picked up.
"We're seeing a more aggressive, offence-type investing," a U.S. technical analyst told MarketWatch. "May was all about defence."
Oil rallied to its highest level since early May, above its 200-day moving average. Crude futures were recently $1.84 or 2.5% higher at $76.96 a barrel.
Industrial metals rallied for a sixth day as analysts pointed to healthy demand from China and evidence of a pick-up in the U.S. countering the weak outlook in Europe. In late trade in London, copper was ahead 3.2%, aluminium 1%, lead 2%, tin 3.6% and zinc 5.7%. (Nickel data missing today - sorry.)
Gold advanced despite the general rotation away from safe-haven assets, breaking out of its recent trading range to a one-week high. The spot price was recently $13 higher than Monday's New York close at $1,234.40 an ounce. Silver and platinum also advanced.
The major European markets kicked higher for a fifth day, helped by a takeover bid for BSkyB and slowing inflation in the U.K. Britain's FTSE added 0.3%, Germany's DAX 0.82% and France's CAC 0.98%.
TRADING THEMES TODAY
THE BULLS ARE BACK: Last night's breaks by oil and the S&P 500 back above their 200-day moving averages mark a significant change in sentiment. These are important indicators that should bring longer-term investors back into the market. This week's action also confirms that investors are now willing to shrug off bad news from Europe - Greece's credit downgrade looks like a mere blip in a developing market reversal. In short, the outlook is more bullish this week than it has been for a few months. Time to start adding a few overnight holds in my opinion. The speculative end of the market has been desolate lately but it's now worth watching for signs of returning interest. Volume will be the first clue.
METALS: A recovery in base metals is now well underway. Market observers say the fundamentals look healthy and Chinese demand remains strong. Last night's action in precious metals was also very bullish, considering the headwinds. Normally a falling U.S. dollar and strength in 'risk assets' might be expected to weigh on traditional safe havens like gold and silver.
ECONOMIC NEWS: Local interest today centres on the monthly Leading Index of economic indicators at 10.30 am and quarterly housing starts at 11.30 am. A busy session tonight in the U.S. includes the producer price index, building permits, housing starts, industrial production, crude oil inventories and a speech on financial reform by Fed chairman Ben Bernanke.
