A positive open is likely after US stocks recouped half of Monday's losses on solid economic data and a robust defence of the Federal Reserve's monetary policy from Chairman Ben Bernanke.
The March SPI 200 futures contract rallied 29 points or 0.6% to 5007 as gold enjoyed its best session of the year and the big Australian miners edged higher in US trade.
The S&P 500 advanced 0.61% with all 10 industry sectors rising but failed to regain the 1,500 level, closing at 1,497. The Dow put on 116 points or 0.84% and the Nasdaq trailled at +0.44%.
Monday's jitters over Italy's election stalemate were soothed by upbeat housing and consumer confidence data. Sales of new homes surged 15.6% last month to their strongest rate since July 2008 and a 0.2% increase in prices in December sealed the best year for growth in house values in seven years. The revival in the housing market helped an index of consumer confidence jump to 69.6 this month from a revised 58.4 in January, well ahead of expectations.
"The economic numbers have been holding up really well," the director of market and sector analysis at Charles Schwab in the US told Bloomberg. "The home data show that the housing market is rebounding and should continue to contribute to growth. It helps to feed into consumer confidence as well. They're related. In a time when we see more uncertainty rising, decent economic data helps to calm things down a little bit."
The market wobbled after Ben Bernanke warned that automatic government spending cuts due to take force on Friday will dent the US economy, but the indexes resumed their uptrend as the Fed Chairman made it clear he supports the continuation of the QE3 bond-buying program. "In the current economic environment, the benefits of asset purchases... are clear," he said. Read more here.
Gold jumped back above US$1,600 an ounce as Bernanke underlined his commitment to the Fed's current inflationary policy. Gold for April delivery was lately up $26.80 or 1.7% at US$1,613.50 an ounce. The rise was the metal's biggest one-day rally of the year.
Oil bounced with gold in the US but was unable to hold its gains as Italy's inconclusive election result dulled the outlook for European demand and drove European stocks sharply lower. Germany's DAX plunged 2.27%, France's CAC 2.67%, Italy's FTSE MIB 4.89% and Spain's IBEX 35 3.2%. West Texas crude for April delivery was recently off 49 cents or 0.5% at US$92.61 a barrel.
Copper found support in US economic data as most base metals pared recent losses. US copper for March delivery was recently up three cents or 0.7% at US$3.59 a pound. In London, copper added 0.3%, lead 0.2%, tin 0.7% and zinc 0.45%. Aluminium retreated 0.7% and nickel 0.4%. BHP rallied 0.24% in US trade and Rio Tinto put on 0.51%.
TRADING THEMES TODAY
REBOUND: Our market began to recover pretty quickly yesterday and looks likely to resume its uptrend today. Gold is an obvious overnight highlight, but bargain hunters may also find tempting recent lows in silver, copper and other metals. Oil's weakness is a slight cause for concern, given the strength in other risk assets overnight. With the sequestration issue still outstanding, US investors don't appear over-enthusiastic about the short-term outlook - the Dow Jones Transportation Index, a useful yardstick for risk appetite, managed a paltry rise of 0.08% and the Russell 2000 trailled the larger benchmarks at +0.5%. Against that, the VIX dived nearly 12%.
COMPANIES REPORTING: The highlights of another heavy schedule of corporate reports today include AGK, JHX, SYD, UGL, WDC, WRT and WTF (source: Fairfax). More reporting info here.
ECONOMIC NEWS: Quarterly construction work figures are due at 11.30am EST. Europe has a raft of data due tonight, including a retail index, but most interest will likely lie in an Italian bond auction and a speech by European Central Bank President Mario Draghi in Germany. Another busy night in the US includes durable goods/core durable goods, pending home sales, further testimony from Fed Chairman Bernanke and crude oil inventories.
