Morning traders. Thanks Trees. Everyone find their way to the new home? Took me a moment or two. Thanks Admin.
Market wrap:
Shares are likely to open modestly higher after US stocks coasted to another record close and the price of iron ore continued to recover.
The September SPI 200 futures contract rallied ten points or 0.2% to 5390 despite weak trade in BHP and Rio Tinto in the US following Friday's ASX reversal when institutions unwound some of Thursday's index derivative-related buying.
The S&P 500 and Dow both closed at all-time highs during a quadruple-witching session in the US on Friday, while the Nasdaq ended at its strongest level in 14 years. The S&P 500 advanced four points or 0.18%, with energy stocks leading the way as oil marked a new nine-month high. The Dow put on 26 points or 0.15% and the Nasdaq nine points or 0.2%.
“This is an 'energy bunny' sort of market that wants to keep marching higher and for a good reason,” Terry Sandven, chief equity strategist at US Bank Wealth Management,told Bloomberg. “The US economy is showing varying signs of improvement. Earnings are rising, interest rates are low and inflation is elevated, but not at extremes. That’s a favorable environment for equities to march higher.”
Trading volume was the heaviest since April as the expiry of four different kinds of equity and equity index derivatives offset the absence of any major economic news. Volatility was modest, in line with recent trends on quadruple witching sessions, once notorious for heralding significant market disruption.
The S&P 500 stretched its run of wins to six, the index's best streak since April. The gain for the week of 1.6% was also its best since April. Biotechs and small caps were among Friday's standouts, with the Nasdaq Biotechnology Index rising 1.93% and the Russell 2000 index of small caps gaining 0.37% and marking a new 11-week high..
Spot iron ore for import to China continued to bounce off last week's 21-month low, rising $1.40 to US$92.10 a dry tonne. BHP retreated 0.79% and Rio Tinto 0.4% in US trade.
Tensions in Iraq helped drive oil to another nine-month high. West Texas Intermediate crude oil for August delivery rallied rose 78 cents or 0.8% to settle at US$106.83 a barrel before ending the week at US$106.62.
Copper improved for a sixth straight session, its best run of the year, and zinc hit a 16-month high as the US Federal Reserve's dovish outlook continued to depress the US dollar, making commodities cheaper for holders of other currencies. In London, copper rallied 1.41%, lead 0.05% and zinc 1.11%. Nickel eased 0.78%, aluminium 0.16% and tin 0.09%. US copper for July delivery gained four cents or 1.2% at US$3.12 a pound.
US gold stocks pared recent advances as the metal ended the session little changed. The NYSE Arca Gold Bugs Index eased 0.56%. Gold for August delivery settled $2.50 or 0.2% higher at US$1,316.60 an ounce but ended the session barely ahead at US$1,314.80.
European stocks gave up initial gains following news of an unexpected drop in consumer confidence. The European Commission's flash consumer-confidence index declined to -7.4 this month from a six-year high of -7.1 in May, ending a recent run of improving readings. The Stoxx Europe 600 index slipped 0.02% as Germany's DAX lost 0.17%, France's CAC 0.48% and Britain's FTSE gained 0.25%.
TRADING THEMES THIS WEEK
CHINA'S ECONOMIC REVIVAL: This week brings opportunities to gauge the scale of recent improvements in the Chinese economy with the release of manufacturing data today and a leading index tomorrow. The threat of a hard landing and weak demand from our biggest trading partner is a major reason why the ASX has trailled equity gains in the US and Europe. HSBC's Flash Manufacturing PMI, due at 11.45am ES today, is expected to improve to 49.7 from last month's final reading of 49.4, according to Forex Factory. However, with recent signs of support for the economy from Chinese leaders, you have to think there is a chance of an upside surprise.
IRAQ AND OIL: Oil 'shocks' are notorious for cruelling stock markets because a rising oil price effectively acts like an additional tax on the consumer, depressing spending, and adds to input costs for most listed companies. The current oil price is a long way from putting a brake on this bull market, as evidenced by US indexes at record highs. However, the volatile situation in Iraq warrants watching because it has the capacity to destabilise the entire region and draw the west into another unhappy and expensive engagement in the Middle East.
SOLID US ECONOMIC MENU: There is plenty of meaty material to digest this week as investors search for evidence that the US economy is continuing to improve. The expected recovery from a winter slowdown has been at best, mixed. This week's bellwether data includes: existing home sales (tonight); consumer confidence, new home sales (tomorrow night); revised GDP, durable goods orders (Wed); consumer spending, personal income (Thu); and consumer sentiment (Fri).
ECONOMIC NEWS: There is no significant domestic economic news scheduled this week.
