Australian shares are aiming at fresh 21-month highs after positive economic data pushed the Dow above 14,000 for the first time in five years.
The March SPI 200 futures contract rallied 24 points or 0.5% to 4903 as US stocks celebrated an improving employment and manufacturing outlook.
The Dow surged 149 points or 1.08% to 14,010, a level last seen in October 2007 before the GFC crashed the market. The blue-chip index will start the week just 1.1% off its all-time high. The S&P 500 put on 0.99% as all 10 sectors advanced and now sits about 3.3% off record levels. The Nasdaq added 1.17%.
January payrolls growth was slightly below expectations at 157,000 but the market cheered upwards revisions in December and November figures to 196,000 and 247,000, respectively. Unemployment edged up 0.1% to 7.9%. Other reports showed manufacturing activity increased to a nine-month high and consumer sentiment unexpectedly improved.
"Everyone was so concerned about the fiscal cliff, yet we had some really strong hiring in the private sector during those months," the regional chief investment officer at Wells Fargo Private Bank told MarketWatch.
Although the defensive telecoms sector topped sector gains on the S&P, traditional measures of risk appetite were strong. The financial and materials sectors rose at least 1.2%. The Russell 2000 index of small caps gained 1% to record levels and the Dow Jones Transportation Average, also in record territory, added 0.9%.
A commodity gauge, the Thomson Reuters-Jefferies CRB index, claimed a three-month high as Friday's US and Chinese data painted an encouraging picture of a global economy on the mend. West Texas intermediate crude for March delivery rallied 12 cents or 0.1% to US$97.61 a barrel and a weekly gain of around 2%. Over the weekend, China reported that its services sector expanded for a fourth month. Read more here.
Gold benefitted from initial disappointment at the US jobs report, but pared gains as other data beat expectations. Gold for April delivery advanced $3.70 or 0.2% to US$1,668.40 an ounce.
Copper shrugged off mild concern at China's official manufacturing report on Friday, which came in slightly weaker than HSBC's private report. US copper for March delivery improved by more than five cents or 1.4% to US$3.78 a pound. In London, copper rallied 1.3%. Aluminium, lead, nickel, tin and zinc also made gains.
The major European markets advanced despite selling pressure in Spain as a ban on short selling expired. Germany's DAX gained 0.73%, France's CAC 1.11% and Britain's FTSE 1.12%. Spain's IBEX 35 slumped 1.59%.
TRADING THEMES THIS WEEK
EARNINGS SEASON: As the US earnings season passes the halfway mark, the domestic scene may garner more attention as profit reports start to trickle in this week. Reports from Cochlear and Transurban mark the unofficial start of the local earnings season tomorrow. As Fairfax reports, there is scepticism whether earnings growth can match the recent rally in share prices. However, market momentum is strong right now and it would take a lot of disappointments to undermine the new mood of optimism.
RATES AND JOBS: A busy week for domestic economic news includes two potential market-movers: a Reserve Bank rates decision tomorrow and employment figures on Thursday. Any rate change at tomorrow's RBA policy meeting would be a surprise, with Credit Suisse data rating the likelihood of a cut at just 22%, according to Fairfax. Nonetheless, a majority of economists expect the easing cycle to continue this year - just not yet. Expectations are low for Thursday's monthly jobs report. The unemployment rate is expected to inch up 0.1% to 5.5% and jobs growth is expected to be a modest 6,100.
FISCAL CLIFF PART 2: With world markets heavily into "over-bought" territory, expect some wobbles in the weeks ahead as US politicians draw the battlelines for the deferred spending cuts debate. Automatic cuts to domestic and military spending are due to kick in on March 1 unless another compromise is found. Round two of the fiscal cliff debate is about to commence.
ECONOMIC NEWS: A busy week for domestic data includes: job ads, building approvals (11.30am EST today); services index, house price index, trade balance, cash rate RBA statement (tomorrow); retail sales (Wed); construction index, employment change, unemployment rate, business confidence (Thu); and RBA Monetary Policy Statement (Fri). Chinese trade balance and inflation figures are due on Friday. This week's highlights in the US include: factory orders (tonight); ISM services (tomorrow); weekly jobless claims, productivity (Thu); and trade deficit (Fri).
