Market wrap: Australian shares are likely to open around 0.5% stronger after the U.S. rallied on Friday on hopes of further government stimulus.
The local December SPI futures contract closed 22 points or 0.47 ahead at 4717 on Saturday as commodity prices rebounded.
The Dow Jones Industrial Average closed above 11,000 for the first time in five months as traders interpreted a dismal jobs report as another reason for the Federal Reserve to buy debt to boost the struggling U.S. economy. The Dow rallied 58 points or 0.53% to 11,006 on Friday for a weekly gain of 1.6%. The S&P 500 added 0.61% and the Nasdaq 0.77%.
The U.S. lost 95,000 jobs last month, far more than the 8,000 losses expected by economists and accelerating fro the 57,000 jobs lost the previous month. The fall left the unemployment rate steady at 9.6% and raised the odds on another government stimulus package emerging from next month's Federal Reserve meeting.
"The economy is still not creating jobs and the Fed is probably going to do quantitative easing," a managing partner of U.S. hedge fund Traxis Partners told Bloomberg. "It indicates that we're still in this soft patch, and in order to get out of that and minimise the risk of a double dip, we need more fiscal and monetary stimulus."
The U.S. dollar resumed its downtrend on expectation that the Fed will effectively print more money. Treasury yields sank and metals and oil rallied. The dollar index slipped 0.3% to 77.18 as the dollar hit a 15-year low against the yen.
"It looks like weak economic data is actually positive for commodities as it boosts expectations of quantitative easing out of the United States which has been one of the motivators of the market recently," an analyst at Deutsche Bank told Reuters.
Industrial metals charged higher, with copper hitting a fresh two-year high and others marking multi-month highs. In London, copper rose 2.2%, aluminium 3.9%, lead 3.4%, nickel 2%, tin 3.1% and zinc 1.5%.
Oil maintained its recent relationship with rising equities and a weak dollar price. Crude futures rallied 99 cents or 1.2% to $82.84 a barrel.
Precious metals wrapped up a fourth week straight week of gains, with silver at a new 30-year closing high and gold just short of another record close. Silver for December delivery improved 52 cents or 2.3% to $23.11 an ounce. The spot gold price ended at $1,347 an ounce, $13.40 stronger than Thursday's New York close but $2.10 off Wednesday's record close.
The major European markets closed mixed and little changed for a second day. Britain's FTSE dipped 0.08%, France's CAC lost 0.19% and Germany's DAX rallied 0.25%.
TRADING THEMES THIS WEEK
U.S. REPORTING SEASON: Corporate earnings reports are likely to overshadow economic news this week as the third-quarter earnings season in the U.S. builds steam. The season got off to a positive start late last week as Alcoa's earnings surpassed expectations. The aluminium producer surged 5.7% on Friday. Bellwether stocks reporting this week include Intel (Tue); J.P. Morgan (Wed); Google (Thu); and GE (Fri).
SOARING DOLLAR: The charging Australian dollar will produce losers as well as winners and we may start to hear from the former as the annual meeting season draws nearer. The ASX's continuous reporting obligations require companies to "fess up" if they are going to miss earnings targets badly and we are getting into the so-called 'confession season'. An article in The Australian on the weekend speculated that potential victims of the rising dollar will include PPX, AMC, IPL, CSR, ALL, CSL, FGL, COH and BKN. Read more here.
ECONOMIC NEWS: This week's local reports include: monthly home loans (11/30 am today); business confidence (Tue); consumer sentiment (Wed); and inflation expectations (Thu). The U.S. has nothing important scheduled tonight. This week's highlights are: FOMC Meeting Minutes (Tue); trade balance, unemployment claims and producer price index (Thu); and the consumer price index, retail sales and consumer sentiment (Fri).
