Market wrap: Australian stocks are set to gap higher this morning after two strong sessions on Wall Street as investors cheered evidence that the U.S. jobs market is recovering.
Wall Street rallied again overnight after the Easter Friday jobs report delivered the biggest jump in employment in three years. The Dow climbed 46 points or 0.43% overnight to add to Thursday's 0.7% gain. The broader S&P 500 fared even better, advancing 0.79% overnight after Thursday's 0.7% surge. The Nasdaq improved its Thursday figure of +0.2% with a 1.12% advance last night.
The Australian futures market last traded at midnight on Thursday with the June SPI contract up 11 points at 4938. However, subsequent gains in the U.S. and on commodity markets should see our market open much stronger than that figure suggests.
There were high hopes for Friday's U.S. jobs report and the numbers broadly matched expectations. The U.S. created 162,000 jobs in March, the largest seasonally-adjusted increase in "non-farm payrolls" in three years.
A broker and futures analyst told Reuters the labour market has finally turned the corner. "Job creation is the real important part of the recovery," he said. "Now the debate is going to change from, 'Is there a recovery?' to 'Is this a good enough recovery?'"
Other positive overnight economic news added to the optimism. Activity in the service sector beat expectations last month, suggesting the recovery is broadening. The ISM non-manufacturing index rose from 53% in February to 55.4%. A separate housing report saw an index of pending home sales climb 8.2% in February.
Commodity prices were supported by weakness in the U.S. dollar on Thursday and flat trade overnight. Crude oil hit a 17-month high as traders bet on a pick-up in demand as the U.S. economy recovers. Crude futures were recently trading 2.26% stronger at $86.79 a barrel.
The spot gold price rallied 1% to recently trade at $1,131.60 an ounce. Silver climbed 1.3%
The London Metals Exchange was closed overnight but copper hit a 20-month high in New York trade. Copper for May delivery settled up 4.75 cents at $3.63 per pound.
European markets were shut overnight but finished last week strongly. Britain's FTSE added 1.15%, Germany's DAX 1.33% and France's CAC 1.52%.
TRADING THEMES THIS WEEK
INTEREST RATES: The stage is set for our market to break out of this year's trading range today and follow overseas markets to fresh multi-month highs. The only cloud on today's horizon is the threat of interest rate rises when the Reserve Bank announces its decision at 2.30 pm this afternoon. Opinion is divided on whether the central bank will raise the cash rate or hold fire for another month.
OIL: The breakout in the middle of last week has accelerated since our market last traded, pointing to healthy advances this week for our oilers. We should see some big gap opens today. The trick as always for day traders is finding shares where the gains are not all priced in at the open.
ECONOMIC NEWS: A busy week ahead on the local front, with ANZ's monthly job ads today at 11.30 am, an interest rate announcement at 2.30 pm, the services index tomorrow, unemployment on Thursday and construction on Friday. A relatively quiet night in the U.S. tonight, with minutes from the last Federal Open Market Committee meeting the main event.
