Shares are primed to break a four-session losing streak after Wall Street bounced back towards record levels despite muddled economic signals.
The December SPI 200 futures contract rallied 37 points or 0.7% to 5338, bringing relief for investors at the end of a relentlessly negative week.
The Dow closed above 16,000 for the first time, rising 109 points or 0.69% to 16,010. The S&P 500 put on 15 points or 0.82% to finish at 1,796. The Nasdaq gained 1.22%.
"After three consecutive negative days it's reasonable to expect a breather," Lawrence Creatura, fund manager at Federated Investors in the US, told Bloomberg. "There is some good news in the labour report too in that it does indicate a degree of improvement."
A mixed batch of economic reports left analysts cherry-picking different data points to justify last night's rally. First-time claims for jobless benefits tumbled 21,000 last week to 323,000, their lowest level in almost two months. Producer inflation remained benign - wholesale prices declined by 0.2% last month. Consumers grew less pessimistic this month, boosting the Bloomberg Consumer Comfort Index to -14 from a two-year low of -31 in October.
Other data was less positive. Factory activity in the mid-Atlantic region slumped to its lowest level since May.
"The Fed minutes hinted that tapering could come soon, which spooked us yesterday, but that this missed expectations so much adds to the idea that the Fed will continue to be accommodative," Adam Sarhan, chief executive of Sarhan Capital in the US, told Reuters.
Small caps enjoyed a stellar session, boosting the Russell 2000 index by 1.76% back towards all-time highs. Australia's biggest miners were pressured by yesterday's Chinese manufacturing miss. BHP lost 0.87% in US trade and Rio dropped 1.06%. Spot iron ore for import to China slipped 10 cents to US$136.30 a dry tonne but remained well within its recent trading range.
Oil pushed back above US$95 a barrel as a fall in US benefit claims raised demand expectations. West Texas Intermediate crude for January delivery was recently ahead $1.31 or 1.4% at US$95.16 a barrel.
Gold declined for a second session as the prospect of a reduction in the Federal Reserve's inflationary stimulus program continued to reverberate. Gold for December delivery was lately off $17 or 1.35% at US$1,241 an ounce, $6.20 below its trading price at yesterday's Australian lunchtime.
Copper pared recent losses during a mixed session on the London Metal Exchange following economic disappointments from China and Europe. London copper bounced 0.3% and aluminium added 0.1%. Nickel dropped 0.7%, tin 0.6% and zinc 0.1%. US copper for December delivery was recently up three cents or 0.95% at US$3.19 a pound.
Most European stocks closed lower after a contraction in French business activity offset improvements in Germany. Germany's DAX lost 0.07% and France's CAC 0.34%. Britain's FTSE closed unchanged.
TRADING THEMES TODAY
REVERSAL: Trading is full of paradoxes. Depending which market report you read this morning, you would conclude that Wall Street rallied either because key economic data beat expectations (Bloomberg) or missed expectations (Reuters). A jaundiced trader would say it is more likely the market was ready to bounce because it had fallen for three days and this is a bull market. Everything else is retro-fitting. Whatever the reason, the ASX has come back far enough for a decent reversal, despite yesterday's Chinese factory miss. Biotechs and small caps had a good night in the US, but there was no relief for gold miners.
ECONOMIC NEWS: No significant domestic news scheduled today. Europe has a speech from European Central Bank President Mario Draghi tonight and the monthly German Ifo business climate report. A light finish to the week in the US includes speeches from two Fed officials and the JOLTS job openings report.
