Australian shares may shoot for a six-week high this morning after hints of progress in US budget talks helped fuel a reversal in US stocks.
The December SPI 200 futures contract ended the night session six points or more than 0.1% stronger at 4531 after 40 Republicans signed a letter that said "all options" should be explored to break the deadlock in Washington and President Obama said a deal could be reached within a week.
The reports helped the Dow turn a 28-point drop into a gain of 82 points or 0.63%. The S&P 500 advanced 0.14%, while the Nasdaq lost 0.76%. The differences in index performance were largely down to a 4.64% plunge in market heavyweight Apple after Nokia beat it to launch with a key partner in China: Apple dominates the Nasdaq and carries a substantial weight in the S&P 500 but is not a Dow component.
President Obama told business leaders a deal could be struck "in about a week" with sufficient political will. "It's not that tough," he said. Investors were further encouraged by the release of a bi-partisan letter signed by 40 Republicans and 40 Democrats calling for compromise on the package of tax increases and spending cuts due to come into force on January 1.
"Just the idea that we could have some kind of timeline [to deal with the fiscal cliff] is enough to eliminate some of the concerns," a managing partner at LandColt Capital in the US told Reuters. "The fiscal cliff is the headline driver, so anything even slightly positive will move markets."
A mixed menu of economic data once again drew little attention as the market remained fixated on developments in Washington. Jobs growth slowed last month as the after-effects of Hurricane Sandy weighed on the east coast. The economy added 118,000 private-sector jobs, down from 157,000 in October, according to ADP. Other news was brighter: the services sector grew at a faster pace, factory orders unexpectedly increased and productivity improved in the third quarter.
"It's great that we talk about economic data, except for the fact that nobody is going to react to it, because we're still stuck in the fiscal-cliff dungeon," Art Hogan, market strategist at Lazard Capital Markets in the US, told MarketWatch.
The major European markets were encouraged by a rebound in business activity from a 40-week low and by market-supportive comments yesterday by China's new leadership that inspired a 2.87% jump in the Shanghai Composite. Germany's DAX added 0.27%, France's CAC 0.29% and Britain's FTSE 0.39%.
A mixed night on commodity markets saw most industrial metals advance in UK trade, but weakness in oil and gold as the US dollar rallied. Copper reached its highest level since mid-October after Communist Party chief Xi Jinping pledge to ensure stability and growth in the Chinese economy. US copper for December delivery was recently up two cents or 0.6% at US$3.68 a pound. In London, copper gained 0.9%, aluminium 0.5%, lead 0.4%, nickel 0.2% and zinc 0.2%. Tin lost 0.3%.
Oil was pressured by the deterioration in US jobs growth but curbed its losses after the weekly US inventory report topped expectations. West Texas crude for January delivery was lately down 67 cents or 0.8% at US$87.83 a barrel after falling as low as US$87.46.
Gold pared losses in the last few hours to trade little changed. Gold for February delivery was down $1.50 or 0.1% at US$1,694.30 an ounce after ranging as high as $1,708.30 and as low as $1,686.
TRADING THEMES TODAY
GROWING OPTIMISM: A late fade on Wall Street stripped some of the impetus from our market this morning, but there should still be enough fuel to threaten the six-week high. There were hints of sanity in US budget talks, but no guarantee yet that the sane will win the day. Fox News will be stirring up lynch mobs for those who utter the heresy of compromise. The 11.30am EST release of monthly unemployment figures here has the potential to push the market one way or the other. Expectations are downbeat: jobs growth is expected to be weak and the jobless rate is expected to tick up to 5.5% from 5.4%, according to Forex Factory. That may leave room for an upside surprise.
ECONOMIC NEWS: Employment figures at 11.30am EST are today's potential market-mover. The euro-zone and Britain make rate announcements tonight. Weekly jobless claims and natural gas storage are tonight's highlights in the US.
