Wall Street's longest winning run in seven months has Australian shares positioned for fresh five-and-a-half-year highs this morning.
The June SPI 200 futures contract rallied 20 points or 0.4% to 5492 as well-received earnings from Netflix, Xerox, Harley-Davidson and Comcast helped the S&P 500 advance for a sixth night.
The benchmark equity index in the US put on eight points or 0.43% despite a late fade that took some of the shine off the session. The index had been up as much as 13 points with a little over an hour left to trade. The Dow rose 65 points or 0.39% and the Nasdaq added 39 points or 0.96%.
"Sentiment had gotten too negative, and some decent earnings reports have started helping the market," Michael James, managing director of equity trading at Wedbush Securities in the US, told Bloomberg. "That, combined with... positive deal talk and chatter in health care, gives a better tone to the market overall and certainly some support."
Health care stocks led the rally, rising 1% following a burst of deal-making in the sector. Valeant announced a take-over offer for Allergan, Novartis and GlaxoSmithKline announced plans to trade product portfolios and there were reports of merger talks between Pfizer and AstraZeneca.
The deal talk lit a fire under European health stocks as the continent's markets re-opened after Easter. The Stoxx Europe 600 index surged 1.38% as Germany's DAX gained 2.02%, France's CAC 1.18% and Britain's FTSE 0.86%.
The Nasdaq Biotechnology Index continued to recover from last week's five-month low, rising 3.23% to a two-week high. Small caps also were on the mend, driving the Russell 2000 Index up 1.16% to a seven-session high.
New data overnight showed the recent downturn in the US housing market continued last month. Annual sales of existing homes declined 0.2% to the slowest rate since July 2012, slightly above expectations. The SPDR S&P Homebuilders ETF rose 0.98% in response.
Nickel recorded a new 14-month high as base metal trade resumed on the London Metal Exchange following the Easter break. Nickel advanced 2.2%, extending a run that has seen the metal rise more than 30% this year following the introduction of an export ban in Indonesia. Copper rose 0.3%, aluminium 1.3%, lead 0.8%, tin 1.1% and zinc 1%. US copper for May delivery was recently up 0.5% or nearly two cents at US$3.06 a pound.
Oil for May delivery slumped to a two-week low ahead of the contract's expiry at the end of the session. West Texas Intermediate crude oil for May delivery dropped $2.24 or 2.2% to settle at US$102.13 a barrel. The June contract was lately down 1.75% at US$101.85.
BHP and Rio Tinto edged higher in US action despite further deterioration in the price of iron ore yesterday. BHP edged up 0.54% and Rio Tinto gained 0.2%. Spot iron ore for import to China eased 80 cents to US$112.50 a dry tonne.
Gold stocks shrugged off a third straight loss in gold overnight. The NYSE Gold Bugs Index rose 1.49% as gold for June delivery dropped $7.40 or 0.6% to settle at US$1,281.10 an ounce.
TRADING THEMES TODAY
BLUE SKIES BECKON: A fifth straight rise and a new 2014 high are within reach today, provided the preliminary April manufacturing update from China at 11.45am EST comes in no worse than expected. Economists expect HSBC's flash reading to improve to 48.4 from a final reading of 48 last month, according to Forex Factory. Quarterly Australian consumer inflation figures are due 15 minutes earlier. If the market can overcome those hurdles, the way looks clear for another up-leg. However, it's worth noting that this latest run in the US looks pretty mature and there were signs of profit-taking at the end of the session overnight.
ECONOMIC NEWS: Quarterly consumer price index and trimmed mean CPI figures are due at 11.30am EST, followed by HSBC's flash Chinese manufacturing PMI at 11.45am. Europe releases services and manufacturing updates tonight. US highlights include new home sales, flash manufacturing PMI and crude oil inventories.
