The share market is set to open near a four-and-a-half-year high after bets on continued central bank stimulus helped drive the S&P 500 to record levels overnight.
The June SPI 200 futures contract advanced 21 points or 0.4% to 5150 as BHP and Rio Tinto gained in US trade and oil and metals extended last week's rebounds. That suggests the ASX 200 may open above this year's closing high of 5146.9 set on March 11, the index's best finish since September 2008.
US stocks rallied overnight as house sales improved and benign inflation data presented no obstacle to the Federal Reserve continuing its efforts to rev up the economy at this week's policy meeting. The S&P 500 hit a record high at 1,597 before paring its advance to 12 points or 0.74%, just enough for a new record close. The Dow put on 106 points or 0.72% and the Nasdaq added 0.85%.
"There's just a positive tone to the market in part because recent lacklustre economic trends have reinforced investors' belief that the Federal Reserve will continue to press on the gas pedal," a fund manager at Stifel Nicolaus & Co in the US told Bloomberg.
The Federal Reserve commences a two-day policy meeting tonight following a run of weak US economic data that is expected to ensure the continuation of a bond-buying program that has channelled billions into money markets. Overnight the personal consumption expenditure price index, a measure of inflation, slowed to growth of 1% over the 12 months to March from a rate of 1.3% in February. The reading was the weakest since October 2009.
Other reports for pending house sales and consumer spending were stronger than expected. Pending home sales increased 1.5% last month, reversing a 1% drop in February. Consumer spending increased by 0.2% in March, down from 0.7% in February but ahead of the consensus forecast.
Also helping sentiment were gains on European markets after Italy announced the formation of a new coalition government, two months after a general election ended without a clear result. New Prime Minister Enrico Letta was sworn in over the weekend, breaking a lengthy deadlock. Italy's FTSE MIB share index jumped 2.2% overnight, Germany's DAX 0.76%, France's CAC 1.55% and Britain's FTSE 0.49%.
A soft night for the US dollar ahead of the Fed meeting helped dollar-denominated commodities extend last week's recoveries, boosting resource stocks. BHP rallied 1.99% in US trade and Rio Tinto put on 1.65%. West Texas intermediate crude oil for June delivery was recently up $1.43 or 1.5% at US$94.42 a barrel.
Gold and silver found fresh support ahead of central bank meetings in Europe and the US this week that are expected to be accommodative. Gold for June delivery was lately up $16.70 or 1.2% at US$1,470.30 an ounce. July silver put on 55 cents or 2.3% at US$24.34 an ounce.
Industrial metals joined the commodity rally after missing out on Friday. US copper for May delivery was recently up three cents or 1.1% at US$3.22 a pound. In London, copper added 1.75%, aluminium 1.1%, lead 0.3%, nickel 2%, tin 0.6% and zinc 0.5%.
TRADING THEMES TODAY
MARCH HIGH IN SIGHT: A week-long rally from the mid-month low has the ASX 200 suddenly back within sight of last month's four-and-a-half-year high. A close today above 5146.9 would be very bullish, as would any push above this year's intraday high of 5163.5. US traders had their cake and ate it overnight, celebrating economic news that was stronger than expected while at the same time betting that central banks will maintain loose monetary policies because recent economic data has been weaker than expected. Go figure. What was obvious is that Wall Street is back in a "bad news for the economy is good news for shares" frame of mind, which bodes well for the week ahead. The gains were broad, with cyclicals leading the way.
ECONOMIC NEWS: Monthly private-sector credit figures are due at 11.30am EST. Trading in Shanghai remains suspended for a three-day holiday. Europe released a welter of data tonight, including unemployment, inflation and German consumer climate. US highlights include consumer confidence, Chicago PMI, employment cost index and house price index.
