Market wrap: Evidence of global growth and improving American home sales helped Wall Street move higher overnight, pointing to a positive start to local trade.
The September SPI futures contract closed 26 points stronger this morning at 4502, suggesting a third day of gains lies ahead for local equities.
U.S. investors were cheered by a rise in sales of new homes after two dismal months and an improved global outlook from FedEx. The Dow Jones Industrial Average moved back into positive territory for the year with a gain of 101 points or 0.97%, its third straight rise. The S&P 500 added 1.12% and the Nasdaq 1.19%.
Package-delivery companies like FedEx and UPS are seen by market observers as bellwethers for global growth. Shares in FedEx rallied nearly 6% overnight after it upgraded its profit forecast. The news followed a profit upgrade from UPS last week.
"Stocks are going to move higher," a US-based chief equity market strategist told Bloomberg. "When a bellwether like FedEx boosts its forecast, it's not just about the company, but about the implications for the global economy. In addition, the home sales number was much better than we thought it would be."
Sales of new homes bounced back last month from record lows in May, according to government data. Sales improved 23.6% in June, sparking a rally in home-builders. Other notable sector gains overnight included biotechs +3.2%, airlines +2.9%, REITs +2.6% and banks +2.6%.
Resource sectors were mixed after a flat night for oil, gains for industrial metals and another slide for gold as the U.S. dollar index eased 0.5%.
Copper hit a 10-week high in U.S. trade, rallying 1.2% as traders bet on improving demand after the rise in new-home sales. In late trade in London, copper was up 1.3%, aluminium 2.1%, lead 1.6%, nickel 2.3% and zinc 1.8%. Tin was 0.5% lower.
Oil was little changed after a tropical storm in the Gulf of Mexico faded. Crude futures were recently off 12 cents or 0.15% at $78.86 a barrel.
Gold's month-long gentle decline continued while other precious metals with industrial uses rallied on the homes data. The spot gold price was recently $7.30 lower than Friday's New York close at $1,182.40 an ounce. Silver, palladium and platinum gained.
A surge in the banking sector after last week's stress test results helped the major European markets move firmly higher. Britain's FTSE climbed 0.73%, Germany's DAX 0.45% and France's CAC 0.81%.
TRADING THEMES TODAY
RISING SENTIMENT: What a difference a couple of weeks makes. After three months of panic over the European debt crisis and fears of a double-dip recession, suddenly Wall Street is over-flowing with optimism. It won't last but it will pay to take advantage of it for now. Markets from New York to London, Shanghai to Tokyo look to have put in medium-term bottoms and technically, look better by the day. This morning's relatively-cautious local futures number perhaps reflects the fall in gold, flat performance by oil and meagre gains for the big miners on overseas bourses. Financials and metals miners could provide any strength in our market after last night's gains on Wall Street and on the London Metals Exchange.
ECONOMIC NEWS: The Conference Board's monthly leading index of economic indicators is due at 10 am. The main news events in the U.S. tonight are monthly consumer confidence, the house price index and regional manufacturing.
