Morning traders. Thanks Trees and after-market regulars.
Market wrap:
The share market recovery looks set to accelerate after unexpectedly strong US economic data fuelled a second night of substantial gains on Wall Street and the largest commodity rally in years.
The September SPI200 futures contract surged 100 points or 2% to 5276 as oil staged its biggest rise in five years and copper and zinc their best gains in two years.
Wall Street's roller-coaster week continued overnight with an opening rally, a plunge just after lunch and a sharp final-hour rebound that left the major indices back at their intraday highs. The S&P 500 closed 47 points or 2.43% ahead to lock in its strongest two-session gain in five years, following a jump of 3.9% on Wednesday night. The Dow added 369 points or 2.27% and the Nasdaq 115 points or 2.45%.
Fears of a slowdown in the US economy dissipated after gross domestic product for the second quarter was revised substantially higher overnight. Growth in GDP was upgraded to a robust 3.7% - exceeding the highest estimate of any economist polled by Bloomberg - from an initial reading of 2.3%. A measure of business investment was revised to an increase of 3.2% from a decline of 0.6% and infrastructure spending to +3.1% from -1.6%.
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Other reports showed that claims for unemployment benefits declined 6,000 last week to 271,000, the first fall in four weeks, and pending home sales increased 0.5% in July, the sixth increase in seven months.
“The economy is in good shape and we’re chugging along at a good pace and that’s good for earnings,” John Canally, chief economic strategist at LPL Financial in the US, told
Bloomberg. “It also should clear some of the noise out of this market. There has been a lot of concern about a slowdown in the economy... We got our pullback, and now we’re going to focus on US things like GDP and the Fed.”
Chinese concerns retreated into the background following reports that the government stepped in late yesterday to help push the Shanghai Composite to a rally of 5.34%. The benchmark Chinese index had lost 23% of its value in five sessions until yesterday amid fears of a deceleration in the economy and further devaluation of the yuan.
European markets resumed their rebound, recouping the week's losses after lending data came in stronger than expected. The Stoxx Europe 600 charged 3.46%, Germany's DAX 3.18%, France's CAC 3.49% and Britain's FTSE 3.56%.
"The combination of stronger economic data from both the US and Europe and more stable China and EM [emerging markets], combined with a somewhat more dovish Fed postponing rate hikes is definitely good news for both the U.S. and Europe," Ilya Feygin, senior strategist at WallachBeth Capital, told
CNBC.
The US data lit a fire under commodity markets as short-sellers who had bet on a global economic slowdown scrambled to cover. West Texas Intermediate crude oil for delivery in October jumped $3.96 or 10.3% to settle at US$42.56 a barrel. The gain, the largest since March 2009, followed reports that Venezuela has requested an emergency meeting of the Organization of the Petroleum Exporting Countries to discuss the recent plunge in oil prices. The request raised the prospect of production cuts to arrest the recent decline in crude pricing to six-year lows.
Copper and zinc saw their biggest gains since May 2013. London copper put on 4.2%, zinc 3%, aluminium 1.8%, lead 1.8% and nickel 5.1%. Tin eased 0.4%. US copper for September delivery was recently up 3.4% at US$2.32 a pound.
Energy and raw materials were the pick of the S&P 500's ten industry groups. The US energy ETF rallied 4.96%, BHP 5.63% in US trade and Rio Tinto 5.33%. Spot iron ore for import to China yesterday rose 20 cents to US$53.30 a dry ton.
Gold miners rebounded sharply despite a fourth straight loss in the precious metal. The NYSE Arca Gold Bugs index bounced 5.79%. Gold for December delivery settled $2 or 0.2% lower at US$1,122.60 an ounce.
The dollar was this morning buying 71.71 US cents.
TRADING THEMES TODAY
CLOUDS CLEARING: Gloom about the global economic outlook continued to lift overnight following a neat one-two punch from Europe and the US and reports that the Chinese government remains willing to support its stimulus measures with actual buying. Traders who had been betting that we're at the start of a global downturn found themselves on the wrong side of a sharp commodities rally and began to cover, adding fuel to the fire. That's good news for Australian investors this morning. Normally I'd say this relief rally was looking pretty mature after three days of gains here and a big gap open to come this morning, but you can't dismiss the scale of the overnight rises. Looks like a strong end to the week. Confidence at the speculative end of the market has taken a knock and normally takes longer to recover.
ECONOMIC NEWS: No significant domestic news scheduled today. The annual Jackson Hole Symposium began overnight and continues tonight. Also tonight in the US: trade balance, personal spending and income, core price index and revised consumer sentiment and inflation expectations.
Good luck to all.
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