Market wrap: Australian stocks will gap higher this morning after signs of life in the struggling US economy stoked a rally on Wall Street overnight.
The September SPI futures contract ended the night session 43 points or 1% stronger at 4211 as US stocks pushed to a third night of gains. Oil and most metals suffered minor losses but gold had its heaviest tumble in three years.
The Dow dipped in and out of positive territory before driving decisively higher in the afternoon to close 144 points or 1.29% ahead. The S&P 500 added 1.31% and the Nasdaq 0.88%.
The advances followed two economic reports that broke the recent run of disappointments in the US. Orders for manufactured goods improved by 4% last month, reversing an upwardly-revised 1.3% fall in June. Also, house prices rose 0.9% in June, even though they remained 4.3% lower than the same time last year.
"Any time you see life in the walking dead, it certainly makes you feel a lot better," the chief investment strategist at the private- banking unit of KeyCorp in the US told Bloomberg. "There's so much pessimism priced into the market that if we get any decent news, it's going to buoy investors' spirits."
Financials led a rally that also saw solid gains for REITs and utilities. Precious-metals miners fell for a second night as a wave of profit-taking dragged gold and silver to heavy losses. Gold fell more than US$100 during its worst session since March 2008 before lately paring its loss. Gold for December delivery was recently off $98.70 or 5.3% at US$1,763.30 an ounce. September silver fell $2.56 or 6% to US$39.73 an ounce.
"People who made a lot of quick bucks are leaving the trade to return at lower points," the head trader and strategist at Kingsview Financial in the US told MarketWatch. Gold had rallied around 25% from its early-July low.
Oil eased late in the session after several days of steady recovery from last week's lows. Crude for October delivery was recently down 30 cents or 0.35% at US$85.14 a barrel.
Industrial metals closed mixed on low volume in London as traders took to the sidelines ahead of tomorrow night's gathering of central bankers at Jackson Hole in the US. In London, copper added 0.25%, lead 0.6% and nickel 0.8%. Tin lost 0.4%, zinc 0.35% and aluminium 0.6%. US copper was recently up 0.4%.
European markets overcame more weak economic reports and yesterday's credit downgrade for Japan. Britain's FTSE put on 1.49%, Germany's DAX 2.69% and France's CAC 1.79%.
TRADING THEMES TODAY
REBOUND: Assuming there are no ugly surprises out of Asia of the sort that quashed yesterday's rally, we appear to have a platform for a decent up-move today. The US continues to send conflicting signals - on Tuesday it rallied because bad economic news meant a higher chance of QE3, last night it rallied because good economic news is, um, good? Gold's sudden tumble suggests traders no longer expect the Fed to announce anything substantive at this weekend's Jackson Hole gathering, thus reducing the need for a safe haven. It's a confused and confusing picture. But ultimately all that matters is that the early-August lows have survived a retest and US stocks are continuing to recover. A rough session likely lies ahead for our gold miners but it's worth observing that the big players all finished well off their lows yesterday, so there's little evidence of panic.
BHP: BHP's bumper profit, announced at the close of the domestic market yesterday, received a mixed reaction from overseas investors. The company's shares rallied 2.87% overnight in the UK and a paltry 0.06% in the US. They were recently down 0.33% in US after-market trade.
ECONOMIC NEWS: No major domestic news scheduled today. Weekly jobless claims are tonight's main event in the US. Also scheduled: natural gas storage data and the arrival of central bankers from around the world for the Jackson Hole Symposium.
