Evidence of a revival in the American housing market helped push US stocks higher overnight and has the ASX targetting a third straight advance.
The December SPI 200 futures contract ended the night session 17 points or 0.4% ahead at 4552 after Wall Street overcame a soft start and the big Australian miners surged in overseas trade.
The S&P 500 rallied 0.42% as strength among builders helped offset weakness in tech stocks following earnings disappointments from IBM and Intel. The Dow, which counts both tech heavyweights among its 30 components, edged up five points or 0.04%. The Nasdaq advanced 0.09%.
Construction of new homes jumped 15% last month in the US, exceeding the wildest expectations of economists surveyed by Bloomberg and MarketWatch. The annual rate of 872,000 was the strongest in four years and helped an index of builders rally more than 3% overnight.
"If there was any doubt that the housing market was undergoing a recovery, even a modest one in the face of the terrible 2008 decline, those doubts should be erased by now," the chief global strategist at BTIG told MarketWatch.
Tech stocks were the biggest drag on the market after IBM and Intel missed analyst targets. Shares in IBM sagged 5% and Intel lost 2.5%. Bank of America eased 0.3% after reporting overnight.
European markets extended Tuesday's strong gains after Spain unexpectedly retained its investment-grade credit rating with Moody's. Expectations had been high that Spain would be downgraded to junk status. Spain's IBEX 35 rallied another 2.37%, Italy's FTSE MIB 1.56%, Germany's DAX 0.25%, France's CAC 0.77% and Britain's FTSE 0.69%.
The big two Australian miners ran hard in US trade after iron ore broke a four-session losing run yesterday. Rio Tinto jumped 4.6% and BHP 3%. Iron ore for delivery to Qingdao in China rallied 1.4% yesterday to US$116.28.
Industrial metals turned higher ahead of a big day for Chinese economic data. US copper for December delivery was recently up five cents or 1.2% at US$3.75 a pound. In London, copper put on 1.2%, aluminium 1.6%, lead 2%, nickel 1.5%, tin 0.3% and zinc 1.2%. Trade in Shanghai was more cautious ahead of Chinese GDP and industrial production figures today (see below), pushing copper down 0.2%.
Gold advanced for a second day as weakness in the US dollar overshadowed signs of improvement in the US economy, reducing demand for havens. Gold for December delivery was recently up $3.80 or 0.2% at US$1,750.10 an ounce.
Early gains in oil were constrained by a larger increase in US stockpiles than analysts predicted. West Texas crude for November was lately down nine cents or 0.1% at US$92 a barrel.
TRADING THEMES TODAY
ANOTHER NEW HIGH: We're looking at a bright start to trade this morning and likely another 14-month high. After that, caution may set in ahead of the lunchtime (EST) release of Chinese economic news that is expected to underline the pace of the slowdown in our biggest trading partner (see below for more). Wall Street was strong in areas that are well represented in our market - banks, resource stocks, industrials - and weak in technology, which is pretty negligible on the ASX these days. Small caps outperformed, lifting the Russell 2000 0.8%.
CHINA UPDATE: The Shanghai Composite has underperformed the rest of Asia this week amid low expectations for today's quarterly GDP update and monthly review of industrial production, retail sales and fixed asset investment. ForexFactory forecasts a decline in GDP to 7.4% from 7.6% the previous quarter. The monthly figures are not expected to show any improvement. That leaves room for surprises in either direction, but when the market is hanging out for more central bank stimulus there's no guarantee that good economic news will be viewed as good for shares, or bad economic news as bad for shares. The figures will be announced at 1pm EST.
ECONOMIC NEWS: Quarterly business confidence figures are due at 11.30am EST. China releases news at 1pm (see above). The European Union commences an economic summit tonight and Spain holds a 10-year bond auction. Highlights in the US include weekly jobless claims, Philly Fed Manufacturing Index, a leading index and natural gas storage.
