Morning traders. Thanks Trees and after-market regulars.
Market wrap:
A relief rally looms for Australian shares after fresh Chinese stimulus measures helped fuel a rebound in commodity prices and Wall Street's best night in four weeks.
The September SPI 200 futures contract, which expires tomorrow, rose 27 points or 0.5% to 5469 following news that China began increasing liquidity to the nation's biggest banks yesterday to arrest a recent slowdown in economic growth. Oil and metals responded with strong gains and the dollar moved back towards 91 US cents. Also helping the market mood was fresh speculation that the Federal Reserve will retain its dovish position on the economy when it releases tonight's policy statement.
The S&P 500 advanced 15 points or 0.75% for its biggest rise of the month. All ten industry groups improved, spearheaded by a rally in energy stocks of more than 2%. The Dow put on 101 points or 0.59% and the Nasdaq 34 points or 0.75%.
The People's Bank of China yesterday injected US$81 billion worth of liquidity into the nation's five largest banks to avert a property slump that threatened to cruel the government's chance of meeting its 7.5% growth target this year.
Read more here. The measure was compared by some analysts to the quantitative easing (QE) program launched by the US Federal Reserve during the depths of the global financial crisis.
“The market sees the letters ’Q’ and ’E’ combined with China and it’s Happy New Year to the money printers and that’s what the jump is,” Joe Saluzzi, co-head of equity trading at Themis Trading in the US, told
Bloomberg. “They want the game to continue. They may not know how or why it’s happening but get some new QE money in there and that’s how the market reacts.”
The Bloomberg Commodity Index rallied 0.74% as copper enjoyed its best session in 13 months and oil neared a two-month high after the Secretary General of OPEC said he expected the cartel to cut production. Abdalla el-Badri said the Organization of the Petroleum Exporting Countries was likely to agree at its November meeting to lower its output target for next year by 500,000 barrels a day to reflect weak demand. West Texas Intermediate crude oil for October delivery jumped $1.96 or 2.1% to settle at US$94.88 a barrel, its strongest close since July 17.
US copper for December delivery was recently up 2.4% or more than seven cents at US$3.16 a pound, its best rise since last August. Earlier in London, copper gained 1.19%, nickel 0.28%, aluminium 1.76%, lead 0.86%, tin 0.4% and zinc 1.33%.
The dollar improved more than half a cent to 90.92 US cents to reflect Australia's exposure to Chinese demand for raw materials. Also supporting the currency was speculation that the Federal Reserve will not change its dovish position on the US economy when it releases its policy statement tonight. Influential Wall Street Journal reporter Jon Hilsenrath said he expects the Fed to retain its commitment to keep rates at record low levels for a "considerable time". The greenback rallied strongly this month on speculation that the Fed was ready to prepare the market for interest rate rises next year. Economic news overnight showed producer prices were flat last month, dampening fears that inflation might become an issue for the Fed.
Australia's biggest miners enjoyed strong sessions in the US, despite a modest paring of Monday's surge in the price of iron ore. BHP rallied 1.33 % and Rio Tinto 2.05%. Spot iron ore for import to China yesterday eased 70 cents to US$84.50 a dry tonne.
Gold eked out a skinny gain, rising for a second day as the US dollar gave back some of its recent advance. Gold for December delivery rose $1.60 to US$1,236.70 an ounce and was lately at US$1,235.80.
The mood was more downbeat on European markets ahead of tomorrow's Scottish independence vote as a closely-watched measure of German economic expectations plunged more than expected. The ZEW indicator slumped to 22.4 from 44.3 last month. The Stoxx Europe 600 index retreated 0.31% as Germany's DAX slid 0.28%, France's CAC 0.44% and Britain's FTSE 0.14%.
TRADING THEMES TODAY
REBOUND: The Australian share market fell into the buy zone yesterday and those who took the plunge are likely to be rewarded today. There were two catalysts for the turnaround overnight: firstly, the Chinese government took the brakes off lending markets to try to get economic growth back on track; and secondly, Wall Street decided it has been too bearish about tonight's Fed meeting. The results were strong gains in commodity markets and the Australian dollar. BHP and Rio appeared to have their best nights in some weeks. Small caps trailled the broader market, but biotechs had a bright session. Of course, the rally could be short-lived if the Fed toughens its outlook for rate rises, but the market is indicating that is less likely than was thought a few days ago.
ECONOMIC NEWS: The Melbourne Institute's leading index of economic indicators is due at 10.30am EST. Tonight is all about the US Federal Reserve's policy statement and press conference. Also due: consumer price index/core CPI, current account, crude oil inventories and housing market index.
Good luck to all.
