Shares are eying a third day of gains after improving economic signals from Europe and the US fuelled equity gains on both sides of the Atlantic and iron ore extended its bull run.
The September SPI 200 futures contract rallied 17 points or 0.3% to 5133 after reports showed improvements in US retail sales and German business confidence. Iron ore rallied for a seventh straight day and copper marked a nine-week high.
The S&P 500 again overcame initial losses to advance five points or 0.27%, led by gains in financials and tech stocks. The Dow put on 31 points or 0.2% and the Nasdaq added 0.38%.
"The general tenor of economic news has been somewhat positive and so perhaps there are some bargain hunters who are coming into the market after some days of correction," a fund manager at Pioneer Investment Management in the US told Bloomberg. "I don't know that we're going to have a roaring recovery anytime soon, but the economy does seem to be advancing, slowly but certainly advancing, and that I think has sunk in finally."
Retail sales in the US increased for a fourth straight month during July. Core sales, the measure most favoured by economists, rose 0.5%, the biggest rise of the year. Barclays increased their GDP prediction for this quarter to 2.2% from 2% following the report. Read more here.
Also helping sentiment were comments from Federal Bank of Atlanta President Dennis Lockhart, who said the uneven recovery in the US made it unlikely that the central bank would commit to a timetable to wind down its stimulus program. He said weak economic growth might give the Fed pause. Read more here.
European markets saw gains after German business confidence recorded a five-month high and data showed the British housing market heating up. The upbeat reports added to expectations that tonight's Q2 euro-zone GDP data will show the region is pulling out of recession after six quarters of negative growth. The Stoxx Europe 600 index rose 0.56% to its highest level since May as Germany's DAX put on 0.68%, France's CAC 0.62% and Britain's FTSE 0.57%.
Iron ore extended its recent rally into a seventh day yesterday as the spot price for import to China rallied another $3.10 or 2.2% to US$141.80 per dry metric tonne. Australia's big two iron ore miners closed mixed in US trade overnight. Rio Tinto rallied 0.8%. BHP eased 0.24%.
A third night of gains saw oil extend a three-session advance beyond 3% as strikes in Libya continued to disrupt supplies. West Texas Intermediate crude oil for September delivery was lately up 40 cents or 0.4% at US$106.51 a barrel.
Gold broke a four-session winning run as the return of Fed taper speculation placed the US dollar back under pressure. Gold for December delivery was recently down $13.30 or 1% at US$1,320.90 an ounce.
Copper eked out a nine-week high, but other base metals lost ground as currency factors took their toll. US copper for September delivery was recently up one cent or 0.3% at US$3.32 a pound. In London, copper rallied 0.3% and aluminium fell by the same percentage.
TRADING THEMES TODAY
TARGETTING THE MAY HIGHS: The XJO broke decisively clear of congestion yesterday and now has the highs of May firmly in its sights. An initial target around 5200/5220 is feasible, although the index seems unlikely to run that far today in the absence of fresh impetus. Still, the last two days have been pleasant surprises, with lacklustre mornings giving way to steady buying pressure as the session advanced, so who knows? Resources have led the charge but financials have room overhead before they meet serious resistance. Mining services companies seem to be back in favour. Most goldies eased in US action overnight.
ECONOMIC NEWS: Consumer sentiment figures are due at 10.30am EST, followed by the quarterly wage price index at 11.30am. Expectations are high for preliminary quarterly European GDP reports tonight. Likely highlights tonight in the US include the producer price index/core PPI, crude oil inventories and two speeches from Fed official James Bullard.
