Australian sharemarket: ASX to open higher after Wall Street rally; Rare earths stocks in focus
Gold climbed 2.5 per cent overnight to trade near its all-time high as traders took advantage of a selloff on Friday to buy more bullion. There’s nothing but buyers in the gold market, said Ole Hansen, commodities strategist at Saxo Bank. The retreat in prices “has already attracted fresh demand today, highlighting the strength of underlying demand still lurking below”.
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TD Securities’ Dan Ghali ascribed the price rally to “extreme FOMO”, the fear of missing out among investors, adding that gold’s ascent this time around is “overwhelmingly driven by the West”.
The big iron ore heavyweights were also higher, with the world’s largest miner, BHP, rising 1.8 per cent, Fortescue Metals adding 0.6 per cent and Rio Tinto lifting by 1.3 per cent.
Meanwhile, the big four banks took a breather after their rally on Monday, which saw the Commonwealth Bank – the nation’s biggest stock – jump 2.6 per cent. CBA shares edged down 0.1 per cent in early trade, Westpac slipped 0.4 per cent and National Australia Bank dropped 0.7 per cent, while ANZ Bank added 0.4 per cent.
On Wall Street overnight, technology shares provided much of the upside muscle for the market, as generally upbeat quarterly earnings results helped revive investor risk appetite after last week’s rollercoaster ride.
The S&P 500 rose 1.1 per cent and got back within 0.2 per cent of its all-time high, set earlier this month. The Dow Jones Industrial Average also gained 1.1 per cent and the Nasdaq composite jumped 1.4 per cent.
Apple stock climbed 3.9 per cent to a record high after Loop Capital upgraded the stock to “buy” from “hold”, becoming the latest firm to cite positive iPhone demand trends. Meta, Netflix and Google owner Alphabet gained between 1.3 per cent and 3.3 per cent. Micron shares rose 2.2 per cent and hit a record after Barclays raised its price target on the stock.
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Amazon’s shares held up despite a widespread outage for its cloud computing service that caused disruption for internet users around the world overnight, with issues continuing to affect its operations early this morning. The stock rose 1.6 per cent.
Among other stock moves, Boeing advanced 1.8 per cent after the plane manufacturer won approval from the US Federal Aviation Administration to raise 737-MAX production to 42 planes per month.
WeightWatchers surged 9.3 per cent following the company’s announcement that it would partner with Amazon for weight-loss drug delivery.
With the earnings season well under way, about 85 per cent of the companies in the S&P 500 reporting results so far have beaten profit expectations, which helped fuel the rebound in equities.
Cleveland-Cliffs helped lead the way with a jump of 19 per cent after the steel company’s chief executive Lourenco Goncalves said it would provide details soon about a potential deal with a major global steel producer that could mean bigger profits. He also said Cleveland-Cliffs has potentially found rare earths at sites in Michigan and Minnesota.
Another source of worry for Wall Street, the banking industry, also appears to be on the up. Stocks of smaller and midsized banks climbed overnight, recovering some of their losses after a couple raised alarm bells last week by warning about potentially bad loans they’ve made.
The disclosures had raised questions about whether the growing list of problems is just a collection of one-offs or a signal of something larger threatening the entire industry.
This will be a heavier week for corporate earnings reports in the US generally. Big names delivering their latest results will include Coca-Cola tonight, Tesla on Wednesday [early Thursday AEDT] and Procter & Gamble on Friday.
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The pressure is on companies to show that their profits are growing because they need to justify the big gains their stock prices have made. The S&P 500 is still near its all-time high, which was set earlier this month following a torrid 35 per cent run from a low in April.
Delivering bigger profits is one of the easiest ways for companies to quiet criticism that stock prices have gone too high. The other is for stock prices to fall.
Corporate profit reports have also taken on more importance because they’re offering windows into the strength of the US economy when the government’s shutdown has delayed many important economic updates.
That’s making the job of the Federal Reserve more difficult, as it tries to decide whether high inflation or the slowing job market is the bigger problem. Fed officials have indicated they’re likely to cut interest rates a few more times through next year to give the economy a boost. But that could be a mistake if inflation worsens, as low rates can push prices even higher.
In light of this, market sentiment was given a boost by White House economic advisor Kevin Hassett, who said the government shutdown is likely to end this week.
In the bond market, Treasury yields held relatively steady. The yield on the 10-year Treasury eased to 3.99 per cent from 4.02 per cent late on Friday.
In other international markets, indexes rose across much of Europe and Asia.
Japan’s Nikkei 225 jumped 3.4 per cent, after its governing Liberal Democrats found a new coalition partner, securing support for its leader Sanae Takaichi to become the country’s first female prime minister. Investors expect Takaichi to push for low interest rates, higher government spending and other policies that could help the market.
Indexes rose 2.4 per cent in Hong Kong and 0.6 per cent in Shanghai after China reported its economy grew at a 4.8 per cent annual pace in the last quarter, supported by relatively strong exports as companies increased shipments to markets other than the US.
Still, it was the slowest pace in a year. The world’s second-largest economy is still struggling to emerge from a prolonged downturn in its property market and to encourage consumers and businesses to spend more.
with AP, Reuters and Bloomberg
