Market wrap: Unexpectedly strong growth in Japan lit a fire under commodity prices overnight, pointing to a healthy session for local stocks.
There were big gains for oil, base metals and precious metals as the U.S. dollar weakened against the yen and euro after Japan's government revealed GDP grew 1.2% in the third quarter from the previous quarter. The 4.8% increase on an annualised basis smashed economists' expectations for a 2.2% rise.
American stocks charged to new 2009 highs as Fed chairman Ben Bernanke reiterated the bank's commitment to keeping its key interest rate target low. The Dow rallied 1.33%, the S&P 500 1.45% and the Nasdaq 1.38%.
Economic news in the US was mixed. Retail sales jumped higher than expected last month on rebounding demand for cars, but September sales were revised down, to a 2.3% decrease from a previously estimated 1.5% fall. A manufacturing survey showed conditions for New York manufacturers improved in November, but at a slower pace than in October. The general business conditions index and index for employment both fell.
Resources stocks took off on hopes that Asian demand will make up for continued weakness in the U.S. next year. Gold/silver miners rallied 2.92%, natural gas companies 2.33% and oilers 1.94%. Also strong: transport stocks +2.47%, airlines +2.31%, REITs +2.31%, insurers +1.86%, industrials +1.77% and banks +1.51%.
"You still have all these markets being driven by an amazing amount of liquidity," said a US director of energy research quoted on MarketWatch. "But there's also this long-term fundamental play going on in the commodity stocks, which are just on fire today."
The major European indexes hit 13-14-month highs. Britain’s FTSE added 1.63%, Germany’s DAX 2.07% and France’s CAC 1.5%.
Precious metals flew higher on short-covering as the US dollar softened. The spot gold price was recently trading at $1,139.30 an ounce, up $21 or nearly 2%. December silver gained 5.9% and January platinum rose 4%.
Crude oil futures bounced hard off yesterday's one-month low, jumping 3.34% to recently trade at $78.87 a barrel. Base metals surged back towards recent resistance levels and copper smashed through to a 13-month high. In London, copper charged 4.37%, boosted by snowstorms in China that have raised supply concerns. Aluminium rallied 4.12%, lead 4.18%, zinc 4.19% and tin 0.68%. Even nickel, recently the worst performer in the group, bounced 2.93%.
Futures traders expect our market to gap up at today's open. The SPI futures index closed 49 points higher at 4820.
TRADING THEMES TODAY
COMMODITIES: If you can dig it up, it almost certainly did well last night. Silver, platinum, gold, copper, zinc, aluminium, lead, oil... take your pick. There should be some substantial gap opens today for overnight holders.
CATCH-UP?: Our market has underperformed global peers lately and the opening level predicted by local futures traders today would still leave us well short of last month's 2009 high. With commodity prices strengthening, the gap between our market and European/US indexes should dissipate in the days ahead.
ECONOMIC NEWS: The RBA's monthly meeting minutes at 11.30 am are the main local release today. Tonight in the US: the producer price index, October industrial production, the housing market index and international capital movements into/out of the US, consumer confidence and more Fed speeches.
