Wall Street's record run has Australian shares primed for a fresh five-year high as the big banks head into earnings season.
The December SPI 200 futures contract surged 33 points or 0.3% to 5418 as US stocks pushed further into uncharted territory on Friday.
The S&P 500 advanced eight points or 0.45% and closed at its session high as profit reports topped expectations and soft economic data pointed to a delay in the Federal Reserve reducing liquidity from money markets. The index has rallied 4.7% this month and 23% this year. The Dow put on 61 points or 0.39% and the Nasdaq added 0.36%.
"Earnings have been good enough and the liquidity spigot is open so that people see very little risk in the system," Charlie Smith, chief investment officer of Fort Pitt Capital Group in the US, told Bloomberg. "It's like a giant game of musical chairs. The attitude on the part of most investors is that they have to play while the Fed got the music going."
Strong earnings reports from Amazon and Microsoft set the tone as Wall Street shrugged off a weak session in Asia on Friday and a flat close in Europe. Shares in Amazon jumped 9.39% after the retailer reported double-digit sales growth. Microsoft put on 5.96% on news of an 11% increase in earnings.
Consumer confidence slumped to a 10-month low this month as the re-opening of the federal government did little to reassure the general public following a damaging political stoush in Washington. The Thomson Reuters/UMich final consumer sentiment index decreased to 73.2 from 77.5 in September. Orders for durable goods were mixed, with new orders declining for a third month.
All 10 S&P 500 industry groups gained, with telecom and utility shares rising more than 1%. However, the big two Australian mining stocks closed little changed, BHP up 0.04% and Rio Tinto dead flat. Spot iron ore for import to China slipped 20 cents on Friday to US$133.30 per dry tonne.
Oil pared its third straight losing week as Thursday's Chinese manufacturing report offered encouraging signs of increasing factory activity. West Texas Intermediate crude for December delivery gained 79 cents or 0.8% to end at US$97.90 a barrel, a loss of 2.9% for the week.
Copper touched a two-week low before recovering. In London, copper edged up 0.1%, aluminium 1%, lead 1.4%, tin 1.4% and zinc 1%. Nickel lost 0.5%. US copper for December delivery put on a quarter of a cent or 0.1% at US$3.27 a pound.
Gold futures wrapped up a 3% rise for the week with a modest increase as the US consumer confidence report offered the Fed no reason to taper its inflationary policies any time soon. Gold for December delivery crawled $2 or 0.15% higher to US$1,352.30 an ounce.
TRADING THEMES THIS WEEK
BANK EARNINGS SEASON and AGMs: The big banks have led this rally and will have a big say in how this week plays out. ANZ, CBA and WBC hit all-time highs last week as investors continued to chase yield. ANZ reports full-year results tomorrow and NAB is due on Friday. MQG also reports on Friday. Westpac's result comes next week, while CBA reported a record result in August. The AGM season continues this week with highlights including: BEN (today); DXS, SGP, UGL (tomorrow); CWN, IAG, JBH (Wed); and BLD, FLT, TAH, TTS (Thu). (Source: Fairfax/BRR Media.)
ASIAN CONCERNS: While the ASX usually marches to two beats - Wall Street and Asia - it has only been heeding the American rhythm lately. As Wall Street hit an all-time high on Friday, the MSCI Asia Pacific Index wrapped up its worst week since August. China's Shanghai Composite dropped 2.8% for a second losing week as the People's Bank of China continued to withhold funds from lending markets in an apparent attempt to cool an over-heating real estate market. The disparity in performance between US and Chinese share indexes is unusually pronounced right now and may eventually bite here. The official government manufacturing report for October is due on Friday, along with the final version of HSBC's private gauge.
US EARNINGS: The US quarterly earnings season crosses the halfway point this week with reports from the likes of Apple, Visa, Exxon, Pfizer, Chevron, Facebook and General Motors.
ECONOMIC NEWS: This week's domestic highlights include: a speech by RBA Governor Glenn Stevens to the Australian & New Zealand Investment Conference (tomorrow); building approvals, private sector credit, import prices (Thu); and the producer price index and manufacturing index (Fri). US highlights include: pending home sales (tonight); retail sales/core retail sales, producer price index, consumer confidence (tomorrow); ADP non-farm employment change, consumer price index/core CPI, Fed statement and funds rate (Wed); weekly jobless claims (Thu); and manufacturing (Fri).
