Australian shares are poised to open higher this morning, mirroring a late surge in New York that propelled the S&P 500 and Dow to new record highs.
After logging its sixth straight day of gains on Monday, the ASX 200 is within reach of its all-time high of 7,628.9 set in August 2021. ASX futures are up 38 points, or 0.5%, to 7,580 at 9am AEDT.
The buoyant mood in Australian markets reflects optimism on Wall Street, where the S&P 500 increased by 0.8%, the Dow gained 0.6% and the Nasdaq rallied by 1.2%. This surge came amidst a decrease in bond yields, after the US Treasury's unexpected reduction in its quarterly federal borrowing estimate to US$760 billion.
Oil eases
Oil prices declined slightly with Brent crude, the global benchmark, trading below US$83 per barrel and West Texas Intermediate below US$77 per barrel.
Analysts are awaiting the United States' response to an attack on a military base in Jordan, purportedly by Iran-linked militants. This geopolitical tension adds a layer of uncertainty to oil markets, influencing price movements.
US futures have risen about 7% this month as the conflict intensifies but adequate supply in the market is keeping a lid on prices.
Iron ore in focus
Vale, the world’s second-largest iron ore supplier, reported a bigger-than-expected increase in production last quarter, which could work to undermine the price of iron ore, the key ingredient in steel.
Iron ore prices have rallied by more than a third since last August, leading some analysts to forecast a decline this year.
So far iron ore has been relatively resilient amid the slowdown in China, the biggest consumer of the steelmaking ingredient. Rio Tinto (ASX:RIO) anticipates that increased stimulus measures will fuel a gradual recovery in China, with the improvement weighted toward the second half.
What happened overnight?
Here’s what we saw (source Commsec):
US markets
US sharemarkets climbed on Monday, with the US Treasury surprising traders after cutting its quarterly borrowing estimate, pushing US Treasury yields lower.
Investors also awaited major events this week including the US Federal Reserve's interest rate decision and big-ticket tech earnings that could test Wall Street's record-breaking rally.
The Dow Jones index rose by 224 points or 0.6% and the S&P 500 index gained 0.8%, both closing at record highs. And the Nasdaq index added 173 points or 1.1%.
- Archer-Daniels-Midland rose by 5.6% after CEO Juan Luciano's letter to employees eased concerns over an investigation of the agricultural giant's intersegment sales.
- Tesla (NASDAQ:TSLA) gained 4.2% after the electric car maker revealed capital spending plans.
- Meta Platforms lifted 1.8% after broker Jefferies raised its target price on the stock to US$455 from US$425.
- Financial technology firm SoFi Technologies (NASDAQ:SOFI) jumped 20.2% on posting a fourth-quarter profit after a loss in the year-ago period.
- iRobot dropped 8.8% as the robot vacuum maker and Amazon (NASDAQ:AMZN) dropped their merger plans in the face of opposition from EU antitrust regulators.
European markets
European sharemarkets ended little changed on Monday, after hitting two-year highs in the previous session.
- The continent-wide FTSEurofirst 300 index gained 0.3%.
- The UK FTSE 100 index fell by less than 0.1%.
Real estate stocks led gains, up 1.1%, but telecoms eased 0.8% with Finnish firm Elisa falling 4.5% after brokerage Indexes downgraded its rating to "reduce". Among stocks headlining, Holcim (SIX:HOLN) jumped 4.7% after the Swiss building materials giant said it would spin off its North American operations.
Commodities
Global oil prices fell on Monday as China's ailing property sector sparked demand worries, causing traders to reassess the supply risk premium from escalating tensions in the Middle East.
Prices rose in early trade, with Brent touching the highest level since early November, after a fuel tanker was hit by a missile in the Red Sea and US troops were attacked in Jordan.
But attention shifted to China, the world's largest oil importer, where a real estate crisis deepened with a Hong Kong court ordering the liquidation of property giant China Evergrande (HK:3333) Group.
- The Brent crude price fell by US$1.15 or 1.4% to US$82.40 a barrel.
- The US Nymex crude price shed US$1.23 or 1.6% to $76.78 a barrel.
Base metal prices were mixed on Monday.
- Copper futures rose by 0.6%.
- Aluminium futures slid 0.3%.
On Monday, the gold futures price rose by US$8.10 or 0.4% to US$2,025.40 an ounce, as rising tensions in the Middle East lifted demand for the safe haven asset.
- Spot gold was trading near US$2,031 an ounce at the US close.
Iron ore futures settled unchanged at US$135.55 a tonne.
Currencies
Currencies were mixed against the US dollar in European and US trade.
- The Euro fell from US$1.0849 to US$1.0795 and was near US$1.0830 at the US close.
- The Aussie dollar rose from US65.81 cents to US66.15 cents and was near US66.10 cents at the US close.
- The Japanese yen firmed from 148.09 yen per US dollar to JPY147.26 and was near JPY147.50 at the US close.
What’s on today?
In Australia, retail trade and consumer confidence data are scheduled.
Eagers Automotive hosts an investor meeting. Atlas Arteria and Megaport both release sales updates. Nickel Industries, Sandfire Resources and Vulcan Energy (ASX:VUL) issue production results.
On the small cap front
The S&P ASX Small Ordinaries gained 0.30% yesterday, while the ASX 200 ended 0.19% higher.
You can read more about the following throughout the day.
- Latin Resources Ltd (ASX:LRS, OTC:LRSRF) has provided an update on its projects including the spinout of its Lachlan Fold Belt projects that are now part of a live IPO for shares in Maverick Minerals Ltd.
- Astral Resources NL (ASX:AAR) diamond drilling at the Kamperman prospect at the Feysville Gold Project has delivered more high-grade gold with intercepts in multiple holes. Reverse circulation drilling to re-commence mid-February.
- Maximus Resources Ltd (ASX:MXR, OTC:MXRRF) has commenced an aircore drilling program at the high-priority Hilditch South gold target at the Spargoville Gold Project, 25 kilometres from Kambalda in WA’s Eastern Goldfields region.
- Akora Resources Ltd has appointed former BHP (ASX:BHP) Iron Ore president, Graeme Hunt as non-executive chairman, effective from February 1, 2024.
- Auric Mining Ltd (ASX:AWJ) has completed the first phase of grade control drilling at the Munda Gold Project, near Widgiemooltha, WA.