Market wrap: Australian shares are likely to open near a nine-month high after a surge in U.S. home sales helped the Dow crack 12,000 for the first time since June 2008.
The March SPI futures contract ended the night session 29 points or 0.6% stronger at 4794 following a flat session in the U.S. on Tuesday night and solid gains overnight. Oil and metals rallied and there were gains for Australian miners listed in the U.S.
Wall Street was boosted by a sharp improvement in the housing market, an upbeat State of the Union address from President Obama and a steady-as-she-goes message from the Federal Reserve. The combination helped the Dow push to a two-and-a-half year high at 12,020 before closing 8 points or 0.07% higher at 11,986. The S&P 500 rallied 0.42% and the Nasdaq added 0.75%.
"There's no doubt the [U.S.] economy has bounced off the bottom," a manager at Greenwood Capital Associates in the U.S. told Bloomberg. "Home sales figures are very encouraging, especially because the industry had been such a drag."
Shares in builders were among the biggest gainers after an 18% jump in new home sales last month as the industry recovers from its worst year on record. The increase was five times greater than economists expected and the biggest month-on-month rise in 18 years.
The Federal Reserve left rates unchanged and pledged to continue its $600 billion stimulus program despite a modest improvement in its economic outlook. The Fed statement said current economic growth "has been insufficient to bring about a significant improvement in labour market conditions".
A retreat in the U.S. dollar to a two-month low helped key commodity prices improve and boosted resource stocks. In U.S. trade, BHP rallied 2.5%, Rio Tinto 3.7% and Alumina 1.9%. The dollar index, which tracks the greenback against six major currencies, was recently down 0.24% at 77.82.
Oil snapped a week of losses despite a surprise increase in U.S. inventories. Crude futures were recently up $1.46 or 1.7% at $87.64 a barrel.
Gold rebounded from near eight-week lows as the greenback's decline encouraged hedging. Gold for February delivery rallied $10.60 or 0.8% to $1,343 an ounce after earlier falling as low as $1,324.
Tin hit its fourth record high in as many sessions as strong U.S. housing data helped firm demand for industrial metals. In London, tin added 2%, copper 1.2%, aluminium 1.65%, lead 2.05%, nickel 2.7% and zinc 2.4%.
"Clearly, of all base metals, tin has best fundamentals, an analyst at Natixis told Reuters. "Supply is constrained, demand continues to expand strongly and, unlike copper, where there is some substitution, tin is not very easy to substitute. So there is very little to stop it going higher."
The major European markets reversed Tuesday night's dip, with Germany's benchmark index setting a fresh two-and-a-half year high overnight. Britain's FTSE rallied 0.87%, Germany's DAX 0.97% and France's CAC 0.73%.
TRADING THEMES TODAY
TESTING THE HIGH: The bulls have been broadly in control in the U.S. since our market closed on Tuesday, setting us up for a run at a new nine-month high this morning. There was little change on Tuesday night but the market session included a back-test of the Monday lows and a nice reversal. The Dow couldn't hold last night's high but the S&P 500 made solid headway. Commodity prices have been solid, with nice reversals in oil and gold overnight potentially tempting bottom-pickers this morning.
ECONOMIC NEWS: The Melbourne Institute's monthly leading index of economic activity is due at 10.30 am. Tonight's schedule in the U.S. includes weekly jobless claims, monthly durable goods orders and core durable goods orders, monthly pending home sales and natural gas storage.
