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Aussie shares looked set for fresh nine-month highs after optimism about China reopening helped US stocks overcame a mid-session wobble.

The S&P/ASX 200 will open 25 points or 0.34 per cent ahead, according to futures action. The Australian benchmark edged up five points yesterday to its best close since April. 

The S&P 500 hit a five-week high in early trade before paring its advance. Lithium miners in the US advanced to their strongest level in six weeks.

Brent crude added to two weeks of gains. Gold edged to its highest finish since April. Copper shrugged off Chinese holidays. The Australian dollar jumped above 70 US cents.

Wall Street

A rebound in China-facing tech stocks lifted the S&P 500 to its highest in five weeks after the market picked up where it left off on Friday. Investors took advantage of a pause in discussion about interest rates in the blackout period leading up to next week’s Federal Reserve meeting.

The S&P 500 rallied 47 points or 1.19 per cent. The Dow Jones Industrial Average gained 254 points or 0.76 per cent. The Nasdaq Composite led with a rise of 224 points or 2.01 per cent.

Some of last year’s worst performers led on hopes of improved demand as China reopens. The PHLX index of semiconductor stocks surged 5.01 per cent. Apple and Tesla, which both rely heavily on Chinese production, advanced 2.35 and 7.74 per cent, respectively.

“This is a remarkable rally in many of the names that did badly last year,” Robert Pavlik, senior portfolio manager at Dakota Wealth, told Reuters. “No one wants to be watching from the sideline with a bunch a cash as the market gets away from them.”

The Fed meets on February 1 and is expected to step back from last year’s aggressive pace of rate hikes by raising by 25 basis points. With the board now in blackout, focus this week is likely to swing to corporate earnings.

More than a third of the Dow and almost a fifth of companies on the S&P 500 are due to report this week. Microsoft, Tesla, IBM, Intel, Johnson & Johnson and General Electric are among the big names delivering updates.

The season so far has fallen modestly short of long-term trends. Refinitiv said 63.6 per cent of companies have beaten earnings estimates, down from the longer-term average of 66.3 per cent. Last quarter, 75.5 per cent of companies exceeded expectations.

The market ignored a recession signal from a leading economic index. The Conference Board’s gauge fell 1 per cent last month as the labour market weakened and manufacturing and the housing market slowed.

“The U.S. [leading economic index] fell sharply again in December — continuing to signal recession for the U.S. economy in the near term,” Ataman Ozyildirim, senior director of economic research at the Conference Board, said.

Australian outlook

The share market’s remarkable start to 2023 shows no sign of running out of gas following a second night of gains on Wall Street. The S&P/ASX 200 climbed yesterday to within 2.3 per cent of a record. The Australian benchmark is on a four-session win run and should have another nine-month high within reach this session.

Growth stocks and lithium miners were among the night’s best performers. The three US sectors dominated by Big Tech (I.T., communication services, consumer discretionary) gained between 1.57 and 2.28 per cent.

Green metal miners climbed to a six-week high. The Global X Lithium & Battery Tech ETF rose 2.69 per cent on the New York Stock Exchange to a second straight gain. The VanEck Rare Earth/Strategic Metals ETF put on 3.1 per cent.

The wider materials sector trailled with a slim gain of 0.32 per cent. Industrials added 1.09 per cent and financials 1.12 per cent. The energy sector finished underwater, down 0.2 per cent after US crude finished flat.

The dollar climbed back above 70 US cents, rising 0.61 per cent to 70.26 US cents. The Aussie has not closed above 70 cents since August.

A busy day of economic data includes flash manufacturing and services-sector gauges at 9 am AEDT and business confidence data at 11.30 am. The Shanghai and Hong Kong share markets remain closed for the Lunar New Year.  

AMCIL and Camplify release interim earnings. Sandfire and Evolution Mining are among the larger companies releasing quarterly updates. Mirrabooka Investments trades ex-dividend.

Commodities

Copper pushed back towards last week’s seven-month high in subdued trade as Chinese Lunar New Year holidays dampened demand. Benchmark copper on the London Metal Exchange rose 0.32 per cent to US$9,354 a tonne. Prices hit US$9,555.50 last week as Chinese buyers stocked up ahead of the week-long holiday.

“Copper is up over 12% this year on positive sentiment surrounding China’s re-opening narrative, physical stockpile shortages and a weaker dollar,” Giles Coghlan, analyst at broker HYCM, told Reuters.

“None of these look like changing much in the near term, but it’s a big week for U.S. earnings. If markets start to price in a greater chance of a U.S. recession, that could weigh on sentiment which could in turn impact copper’s near term prices.”

Aluminium gained 0.79 per cent. Nickel dropped 0.52 per cent, lead 1.94 per cent, zinc 0.2 per cent and tin 0.35 per cent.

Oil was boosted by China reopening and the looming introduction of a price cap on Russian crude on February 5. Brent crude settled 56 US cents or 0.64 per cent ahead at US$88.19 a barrel. The US benchmark, West Texas Intermediate, finished flat, down two cents or 0.02 per cent at US$81.62.

“On the fundamental side, things do not necessarily look that rosy as recession remains likely to take place in the biggest economy in the world,” Naeem Aslam, chief market analyst at AvaTrade, said.

“But for now, traders are optimistic about the Chinese demand reviving from its miserable level. The hope is that it will continue to become better as economic activity returns to its normal level.”

Gold inched to its highest close since April. Gold for February delivery dipped as low as US$1,912.50 before settling 40 US cents or 0.02 per cent higher at US$1,928.60 an ounce. The NYSE Arca Gold Bugs Index added 0.09 per cent.

“For now, gold seems to be able to brush off any bearish factors, such as the risk of recession fading a little and a more optimistic tone on stock markets, and has built up sufficient support to keep it close to its highest level since April,” Rupert Rowling, market analyst at Kinesis Money, said.

Trade in iron ore on the major exchanges, including China and Singapore, was suspended for Lunar New Year holidays.  

BHP‘s US-traded depositary receipts eased 0.11 per cent. Earlier, the miner’s UK stock gained 0.83 per cent. Rio Tinto tacked on 0.49 per cent in the US and 0.58 per cent in the UK.

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