Solid earning and economic news is powering Wall Street higher and has paved the way for a positive start to local trading on Friday.
What you need2know:
• SPI futures up 25 pts at 5397
• AUD at 87.54 US cents, 94.64 Japanese yen, 69.18 Euro cents and 54.61 British pence
• In late trade, S&P 500 +1.3%, Dow +1.4%, Nasdaq +1.6%
• In Europe, Euro Stoxx 50 +1.2%, FTSE +0.3%, CAC +1.3%, DAX +1.2%
• Spot gold falls 0.8% to $US1231.12 an ounce
• Brent oil jumps 2.5% to $US86.84 per barrel
• Iron ore falls 1.9% to $US80.29 per metric tonne
What’s on today
US leading index, new home sales.
Stocks to watch
Buy retail stocks, says Citi: As household finances improve to the tune of $625 and share prices fall there are finally some reasons to buy retail stocks.
RBC Capital Markets has an “underperform” on Woodside Petroleum and a target price of $41 a share after it downgraded oil price estimates.
Retail brokers have all but closed the books on Medibank Private’s initial public offering and told clients to expect allocations worth up to one-third of their bids, the Australian Financial Review's Street Talk column reports.
Currencies
A currently ‘indecisive’ Australian dollar has reacted to this week’s data and “we are likely to see some movement in the currency, but unlikely to see a clear direction”, says Matt Simpson, senior markets analyst at ThinkForex.
As for the US dollar: “Dollar/yen is nicely rallying as a reversal of the carry trade is underway,” said Sebastian Galy, senior currency strategist at Societe Generale in New York. “So the risk-on trade is here as investors search for yield in a stronger performing US economy.”
Bond prices fell, with German government yields higher after the unexpected uptick in euro zone business surveys. US Treasury yields climbed to their highest levels in nearly two weeks after weekly jobless claims fell to the lowest since December 2000. The yield on 10-year German Bunds rose almost 4 basis points to 0.902 per cent. Ten-year US Treasuries fell 16/32 in price to yield 2.2890 per cent.
Commodities
Brent crude oil jumped as much as $US2 a barrel after an industry source said Saudi Arabia cut its supply of oil in September following the summer's tumble in prices.
BHP Billiton's strategy of high-volume iron ore production is the best way to profit in a gloomy market, says CEO Andrew Mackenzie, defending a plan that has come under growing criticism for depressing prices.
Potash Corp of Saskatchewan narrowed its full-year earnings forecast range and the company reported a lower-than-expected quarterly profit as income fell from its overseas investments. The price of the crop nutrient potash has plunged year over year, triggered by the breakup last year of trading partnership Belarusian Potash Co that created more competition among producers.
United States
US stocks pared gains in the final hour of trading on Thursday following media reports that a doctor was being tested at a New York City hospital for a possible case of Ebola.
Earlier in the session, stocks surged on earnings reports from Caterpillar and 3M, which reassured investors that corporations continue to fare well despite concerns about global economic growth.
"It's good to see good numbers in any company, but if we're looking at headwinds like currency and slowing global growth, seeing multinationals like Caterpillar and 3M post solid beats gives us confidence that economic growth is holding on and probably better than the market is currently expecting," said Phil Orlando, chief equity market strategist at Federated Investors in New York.
On the downside, AT&T fell a day after reporting weaker-than-expected revenue growth. The results pressured the telecom sector.
Yelp slumped in heavy trading a day after giving a revenue outlook that was below expectations. Many analysts cut their price targets on the stock.
Europe
European stocks ended higher in choppy trade on Thursday, buoyed by strength on Wall Street but hindered by weak corporate results from companies including French tyre-maker Michelin. The pan-European FTSEurofirst 300 also benefited from better-than-expected euro zone business activity data.
Michelin and Unilever cited poor demand from emerging markets as the former cut its full-year revenue goal and the latter reported weaker-than-expected quarterly sales. Michelin dropped 4.9 per cent, while Unilever’s London-listed shares were down 3.7 per cent.
“I think there still is going to be earnings growth, but there is some evidence that international operations are weak,” said Jasper Lawler, market analyst at CMC Markets. “Euro zone economies still aren’t convincingly strong, and emerging markets aren’t providing much respite either.”
What happened yesterday
The sharemarket closed marginally lower on Thursday, breaking a seven-session rally, with encouraging economic data from China not enough to keep the market in positive territory.
The benchmark S&P/ASX 200 fell 2.80 points to finish at 5383.1, while the broader All Ordinaries lost 3.40 points to finish at 5369.90. Despite the dip, the market has risen 5.1 per cent since its low on October 13.