A strong performance by US markets overnight, particularly in technology and semiconductor stocks, has set a positive tone for the Australian sharemarket.
ASX futures rose 7 points or 0.1% to 8,257 as of 7:30 am AEDT. The Australian dollar also gained momentum, rising 0.5% to 62.41 US cents in early trade.
Semiconductors drive Wall Street
US markets were mixed on Monday. The Dow Jones dipped slightly, losing 26 points or 0.1% after earlier climbing 383 points during the session.
In contrast, the S&P 500 gained 0.6% and the Nasdaq surged 1.2% buoyed by gains in – you guessed it – technology and semiconductor stocks.
Semiconductor stocks rallied sharply, driven by optimism around artificial intelligence and record quarterly revenues reported by Taiwan’s Foxconn (SS:601138).
Nvidia rose 3.4% to a record high, Advanced Micro Devices (NASDAQ:AMD) added 3.3% and Micron Technology (NASDAQ:MU) soared 10.5%, driving the Philadelphia Semiconductor Index up 2.8%.
Automakers also saw gains, with General Motors (NYSE:GM) up 3.4% and Ford rising 0.4%.
US Federal Reserve vice chair for Supervision Michael Barr announced his resignation – the banking sector responded positively to this big news, with the KBW Bank Index rising 0.8%.
European sharemarkets also ended higher on Monday, as investor optimism grew following reports that the incoming US administration may adopt a less aggressive stance on tariffs.
The continent-wide FTSEurofirst 300 index rose 1.0% while Germany’s DAX gained 1.2%, led by a 2.8% surge in the automotive sector.
German inflation data, however, revealed a higher-than-expected annual rate of 2.9% in December, compared to 2.4% in November.
In the UK, the FTSE 100 index rose 0.3%, reflecting investor confidence despite mixed global economic signals.
Commodity markets under pressure
Commodities faced headwinds on Monday. Global oil prices dipped amid weak economic data from the US and Germany, as well as fluctuating market sentiment.
Brent crude fell by 0.3% to US$76.30 per barrel and US Nymex crude declined 0.5% to US$73.56 per barrel.
Earlier in the session, oil prices had been supported by a weaker US dollar and increased energy demand during a winter storm in the US.
Base metals, on the other hand, saw gains as the US dollar weakened. Copper futures rose 2.2% while aluminium added 0.5%.
Gold prices edged lower, with futures down 0.3% to US$2,647.40 per ounce, reflecting rising US Treasury yields and investor caution ahead of key US economic data this week.
Iron ore futures remained steady at US$99.44 per tonne, as conflicting signals from China weighed on prices. While domestic services activity in China expanded at its fastest pace in seven months, steel production slowed, limiting gains in iron ore.
Bond and currency movements
The benchmark 10-year Treasury yield rose 2 basis points to 4.62%, while the 2-year yield fell by 1 basis point to 4.26%. The steepening of the US Treasury yield curve was driven by optimism around potential banking deregulation.
In currency markets, the greenback softened against major currencies. The Euro strengthened, rising from US$1.0307 to US$1.0433, while the Japanese yen gained, trading near 156.25 yen per US dollar before closing at 157.65.
As mentioned, the Aussie dollar lifted to push 63 US cents, hitting 62.99 US cents during the session before settling at 62.40 US cents by the US close.
Here at home, investors will watch for Australian building approvals data, which is expected to provide further insight into the domestic property market.
In the US, critical economic releases, including the ISM services index, JOLTS job openings and trade balance figures, will shed light on the health of the US economy ahead of upcoming Federal Reserve decisions.