Australian stocks are aiming for a fresh three-month high after a third night of gains pushed US stocks to their strongest level since early May.
The September SPI 200 futures contract ended the night session 21 points or 0.5% ahead at 4270 as world markets continued to coast higher on optimism that Europe can contain its sovereign debt crisis.
The S&P 500 broke above 1,400 for the first time since May, rising seven points or 0.51% to 1,401 as the corporate earnings season produced several positive surprises. The Dow put on 51 points or 0.39% despite an afternoon fade and the Nasdaq added 0.87%.
"The fear of things collapsing is going away," the senior investment officer for Chemung Canal Trust in the US told Bloomberg. "The recession, which everyone was concerned about a month ago, is not going to happen. There's a perception that the ECB is willing to buy bonds if needed."
Investors continued to seize on any hint of fiscal stimulus in the US. Federal Reserve official Eric Rosengren reignited hopes for QE3 by telling interviewers the central bank should launch a large asset-buying program. However, Rosengren is not a voting member of the Federal Open Market Committee and his comments placed him at odds with Dallas Fed President Richard Fisher who in a separate interview said the Fed should not move on the economy so close to a presidential election.
Risk appetite remained healthy, with energy stocks the pick of the S&P 500's ten industry groups and an index of companies with the strongest correlation to the US economy advancing 1.3%. A solid night of earnings reports included a record quarterly profit from natural-gas producer Chesapeake Energy.
Strength on Wall Street helped European stocks overcome a night of downbeat economic news. Italy's recession extended into a fourth quarter, German factory orders sagged 1.7% in June and manufacturing output in the UK suffered its heaviest monthly decline since 2008. Despite all that, Germany's DAX rallied 0.71%, France's CAC 1.52%, Britain's FTSE 0.56%, Spain's IBEX 35 2.23% and Italy's FTSE MIB 2.19%.
Oil hit a three-month high before moderating gains ahead of today's weekly US inventories report. West Texas crude for September delivery was lately up $1.33 or 1.4% at US$93.53 a barrel.
Most industrial metals improved ahead of a traditional seasonal uplift in Chinese demand. In London, copper put on 1.1%, aluminium 2.6%, lead 0.95%, tin 2.5% and zinc 1.3%. Nickel eased 0.35%. US copper for September delivery was recently up four cents or 1.3% at US$3.43 a pound.
Gold ended the night little changed as the US dollar struggled for direction. Gold for December delivery was recently down $1.70 or 0.1% at US$1,614.90 an ounce.
TRADING THEMES TODAY
NO NEWS IS GOOD NEWS: With no major US economic news overnight and rock-bottom expectations for European data, Wall Street continued its merry bull run. Shanghai, our other major overseas lead, is finally hinting at a reversal in its long downtrend since early May, so there appears little reason why the XJO should not push through 4300 today and deliver what would be an eighth day of gains in two weeks. Resource stocks were strong in overseas action and will likely lead the way here for a third day. Defensive sectors retreated in the US and have been coming under pressure here lately.
ECONOMIC NEWS: Monthly home loans are due at 11.30am EST. Europe has trade and industrial production data out tonight. A light week for market-moving news in the US continues tonight with preliminary non-farm productivity and unit labour costs, crude oil inventories and a bond auction.
