Wall Street's best two-day rally in more than a month has Australian shares primed for gains after Russia annexed the Crimea and key US economic data improved.
The March SPI 200 futures contract rose 14 points or 0.3% to 5362 on heavy volume ahead of the expiry of the contract tomorrow.
Tech stocks led the advance as the S&P 500 gained 13 points or 0.71% after rising nearly 1% on Monday night. The Nasdaq added 53 points or 1.24% as Microsoft jumped 3.94% after announcing plans to launch Office on Apple devices. The Dow put on 89 points or 0.55%.
"We've got a more congenial Russian message this morning and we got better economic reports here in the States," John Augustine, chief market strategist at Fifth Third Bancorp in the US, told Bloomberg. "The building permits report was very bullish for the spring and summer housing season. Today, we move back to better economic reports and focusing on the Fed."
Overnight, Russian President Vladimir Putin signed a treaty annexing the Crimea following Sunday's regional referendum on seceding from Ukraine. Putin said Russia had no intention to claim any more of its neighbour's territory.
"We don't want to split up Ukraine, we don't need that," the president told the Russian parliament. "Don't believe those who scare you with Russia, who yell that Crimea will be followed by other regions."
In the US, housing starts stabilised last month following a winter downturn, while a big increase in building permits raised expectations for the future. Permits for future work increased 7.7% to the greatest number since October. Consumer prices rose 0.1%, indicating inflation remains well contained and poses no threat to the Federal Reserve's loose monetary policy.
Small caps enjoyed a strong night, bouncing 1.41% back towards this month's all-time high. The Morgan Stanley Cyclical Index rose 0.99%.
BHP gained 0.68% in US trade and Rio Tinto 0.09% as iron ore extended its rebound from 10-month lows. Spot iron ore for import to China yesterday rose 90 cents to US$110.50 a dry tonne.
Gold dropped more than 1% as the threat of conflict in Ukraine appeared to recede, reducing demand for havens. Gold for April delivery was recently off $17.40 or 1.3% at US$1,3555.50 an ounce after settling at US$1,359.
Oil rebounded ahead of tonight's weekly US inventories report and the outcome of new chairman Janet Yellen's first Federal Reserve meeting. West Texas Intermediate crude oil for April delivery was lately up $1.52 or 1.55% at US$99.60 a barrel after settling at US$99.03.
Nickel hit a nine-month high on speculation about further sanctions against Russia, the world's second largest producer of the metal. In London, nickel surged 1.9% and copper added 0.2%. Aluminum, zinc, tin and lead also improved. US copper for May delivery was recently flat at US$2.95 a pound.
European markets were soothed by the suggestion that the Crimea marks an end to Russian territorial ambitions in Ukraine. The Stoxx Europe 600 index rose 0.64% as Germany's DAX added 0.68%, France's CAC 0.96% and Britain's FTSE 0.56%.
TRADING THEMES TODAY
REBOUND CONTINUES: World markets took Vladimir Putin at his word last night, indicating they are willing to overlook the Crimea so long as he promises no more land grabs. Echoes of the 1930s, but this isn't the place for politics. What matters for traders is that markets are back in 'risk-on' mode, favouring cyclical sectors over defensives such as gold. Gold stocks continued to come off in the US, but the HUI's decline of 1.37% was modest compared to yesterday's swoon among Aussie goldies. Oil may have found a new base, subject to tonight's US stockpile report. Biotechs were notably strong in the US, helping the small caps index make another charge towards an all-time high. Be nice if some of that momentum rubbed off here.
ECONOMIC NEWS: The Melbourne Institute's leading index of economic indicators is due at 10.30am EST. The British government releases its annual budget tonight. The conclusion of Janet Yellen's first Fed meeting as chair is tonight's US highlight. Also due: current account and crude oil inventories.
