Shares are set to surge at today's open after upbeat economic data fuelled a substantial rebound in US stocks and the Aussie dollar overnight.
With 30 minutes of the night session remaining, the June SPI 200 futures contract was ahead 59 points or 1.2% at 4743 as the S&P 500 had its best night since January 2, breaking a three-session losing run. The dollar gained nearly two cents overnight, lately buying 96.5 US cents.
Take-over action and improved unemployment data and retail sales helped drive a 23-point or 1.43% rally in the S&P 500 and a rise of 181 points or 1.21% on the Dow. The Nasdaq put on 1.31%.
"We had a decent jobless-claims number and retail sales were pretty solid," a portfolio manager at Federated Investors in the US told MarketWatch. "Both are very encouraging signs of the ongoing mending of the US economy, which helped negate concerns about what happened in Japan overnight."
US stocks opened underwater following yesterday's 6.35% plunge on the Nikkei, but quickly turned positive as retail sales had their biggest rise in three months and jobless claims declines by more than economists expected. Retail sales improved 0.6% last month, following a 0.1% increase in April. First-time claims for unemployment benefits fell by 12,000 to 334,000 last week, lowering the four-week moving average to 345,250.
Also helping to lift the mood after the market's worst losing run of the year was news that Gannett, the publisher of USA Today, will buy Texas broadcaster Belo Corp and supermarket giant Safeway will sell its Canadian outlets.
Cyclical stocks enjoyed huge gains as traders bought companies best placed to benefit from improvements in the US economy. The Morgan Stanley Cyclical Index jumped 3.07% and the Dow Jones Transportation Average added 1.9%.
Australia's big two miners enjoyed substantial gains in US trade after iron ore inched higher yesterday as buying recommenced following a three-day holiday in China. BHP rallied 2.6% overnight and Rio put on 3.59%. Spot iron ore for import to China yesterday edged up $1.10 or about 1% to US$112 per dry metric tonne.
Oil maintained its close link with equities, rising on the back of the solid economic news. West Texas Intermediate crude for July delivery was recently ahead 81 cents or 0.8% at US$96.70 a barrel.
Precious metals lost ground as traders bet that improving economic news made it more likely that the US Federal Reserve will reduce its stimulus program in the months ahead. Gold for August delivery was lately off $8.10 or 0.6% at US$1,383.90 an ounce. July silver fell six cents or 0.3% to US$21.74 an ounce.
Copper hit a six-week low and nickel found its lowest point in four years as yesterday's grim mood in Asia infected trade on the London Metal Exchange. US copper for July delivery was recently down 0.3% or one cent at US$3.22 a pound after earlier falling as low as US$3.16. In London, copper dropped 1%, aluminium 0.4%, lead 1.5%, nickel 1.5% and zinc 1.2%. Tin advanced 0.25%.
European markets pared early heavy losses as the rally on Wall Street gathered pace. Germany's DAX closed 0.59% weaker, but France's CAC gained 0.11% and Britain's FTSE 0.09%.
TRADING THEMES TODAY
BOUNCE: The rebound always comes when you least expect it. Good old Uncle Sam found enough positive domestic news to ignore what's going on in the rest of the world. That should ensure a bright start to the session, spearheaded by the big two miners. After that? The market needs to hold its gains to inspire confidence that the worst of this sell-off is behind us. Personally I find "big open" days the hardest to trade because most of the upside tends to be priced in by 10.10am. I'll likely play wait and see.
ECONOMIC NEWS: No significant domestic news scheduled today. The Bank of Japan releases the minutes from its last monetary policy meeting at 9.50am EST. Europe releases employment and inflation figures tonight. The US ends the week with a flurry of data, including the producer price index/core PPI, preliminary consumer sentiment and inflation expectations, industrial production, long-term purchases, current account and capacity utilisation rate.
