Australian shares are set to catapult higher after upbeat global economic data and central bank support pushed US stocks to record levels overnight.
The September SPI 200 futures contract surged 42 points or 0.9% to 5049 this morning, positioning the ASX 200 for a 10th straight rise following overnight gains in oil, industrials metals, BHP and Rio Tinto.
The S&P 500 cracked 1,700 for the first time as jobless claims fell to a five-year low and manufacturing reports from around the world topped expectations. The benchmark index rallied 21 points or 1.26% to 1,707, a record close. The Dow hit an intraday record before closing 128 points or 0.83% ahead. The Nasdaq put on 1.37%.
European shares also enjoyed healthy rises after the European Central Bank and Bank of England left interest rates at record lows and ECB President Mario Draghi said the region was through the worst of its debt crisis. Germany's DAX jumped 1.63%, France's CAC 1.26% and Britain's FTSE 0.92%.
"Central banks throughout the world remain accommodative and you do not want to fight the central banks," the chief equity strategist at Federated Investors in the US told Bloomberg. "All of the data from an economic standpoint is telling that the economy is continuing to get better, the labour market is improving, and corporate earnings are coming in better than expected. So this market should continue to work higher."
A quartet of manufacturing surprises from China, Britain, the euro-zone and the US hinted that the global economy is regaining traction. Reports showed Europe's manufacturing sector last month grew for the first time in two years, British activity hit a 28-month high and China's official report defied expectations of a downturn. In the US, the Institute for Supply Management's manufacturing index delivered its strongest reading since June 2011.
First-time applications for unemployment benefits in the US last week declined by 19,000 to 326,000, raising expectations for tonight's monthly government jobs report. The reading was the lowest since January 2008.
All 10 S&P 500 industry groups rallied, led by stocks most exposed to the global economy. The Dow Jones Transportation Average soared 3.22% and the Morgan Stanley Cyclical Index added 1.77%. Rio Tinto put on 1.8% in US trade and BHP advanced 1.4%.
Oil rallied strongly for a second day as the improved global manufacturing activity brightened the outlook for energy demand. West Texas Intermediate crude for September delivery was lately up $2.79 or 2.7% at US$107.81 a barrel.
Copper enjoyed its biggest two-day advance since May amid short-covering after the US Federal Reserve left its stimulus program unchanged. US copper for September delivery was recently up four cents or 1.4% at US$3.16 a pound. In London, copper gained 1.7% and aluminium, lead, nickel, tin and zinc also improved.
Gold came under mild pressure from a rising US dollar, slipping to a third straight loss. Gold for December delivery was recently off $4.50 or 0.3% at US$1,308.50 an ounce.
Iron ore ticked lower for a fourth day yesterday. Spot ore for import to China dipped 20 cents to US$129.70 per dry metric tonne.
TRADING THEMES TODAY
UP WE GO: This has been a terrific 24 hours for those of a bullish disposition. Not even Labor's bank deposit levy should deny the ASX a solid kick higher this morning. The key economic data has been extremely positive, the Fed and ECB said the right things from a market perspective and most commodities have responded positively. The manufacturing improvement in Europe looks very promising, even for those who question how China can deliver two manufacturing readings as diverse as those we saw yesterday morning (government: expansion, HSBC: contraction). Precious metals miners were a rare soft spot in the US overnight as most sectors enjoyed gains of at least 1%.
ECONOMIC NEWS: The quarterly producer price index (PPI) is due at 11.30am EST. Europe releases its PPI tonight. Another data-heavy session ahead in the US tonight includes the non-farm employment change report, unemployment rate, factory orders, personal income and spending, average hourly earnings, core price index and a speech by Federal Reserve Bank of St Louis President James Bullard.
