Interrupted refinery production in Texas, in the wake of Tropical Storm Harvey, and some big orders from Europe drove up the price of oil overnight. (Reuters)
Australian shares are expected to edge higher and begin September on a high note.
Markets at 7:30am (AEST):
- ASX SPI 200 futures +0.1 at 5,651, ASX 200 (Thursday close) +0.8pc at 5,715
- AUD: 79.46 US cents, 61.44 British pence, 66.71 euro cents, 87.37 Japanese yen, NZ$1.10
- US: Dow Jones +0.3 at 21,948, S&P 500 +0.6pc at 2,472, Nasdaq +1pc at 6,429
- Europe: FTSE +0.9pc at 7,431, DAX +0.4pc at 12,056, Euro Stoxx 50 +0.5pc at 3,421
- Commodities: Brent crude +2.9pc at $US52.31/barrel, spot gold +1pc at $US1,322/ounce, iron ore +3.7pc at $US78.91/tonne
ASX SPI futures are up one-tenth of a per cent, following a strong lead from Wall Street.
Wall Street rises despite weak data
On the last day of August, US stocks closed in positive territory with every sector posting gains.
The top performing sectors were healthcare and technology, which led to the Nasdaq’s overnight gain of almost 1 per cent. This tech-heavy index has surged 2.6 per cent since the start of the week.
The US share market finished higher despite the release of some weaker-than-expected economic data.
Consumer spending, which makes up more than two-thirds of US economic activity, lifted 0.3 per cent in July. Economists, polled by Reuters, were expecting a slightly higher gain of 0.4 per cent.
Furthermore, the personal consumption expenditures index (which is the Federal Reserve’s preferred measure of inflation) increased by 0.1 per cent in July.
On an annual basis, this is an inflation gain of 1.4 per cent and falls below the Fed’s inflation target of 2 per cent. This is also its smallest gain in almost two years (since December 2015 to be precise).
The probability of a US rate hike in December is now around 36 per cent — a drop from 43 per cent last month — according to CME Group’s FedWatch tool.
In addition, US treasury secretary Steven Mnuchin said, in an interview with broadcaster CNBC, that the Trump administration has a “very detailed” tax plan, which he expects will be pushed through before the end of the year.
Mr Mnuchin said the plan has been presented to members of Congress, and will be released to the public by the end of this month.
He also made comments about Tropical Storm Harvey — that it could bring forward the deadline by which the US debt ceiling needs to be raised.
“We obviously have now the hurricane spending, which is an issue. So that’s going to have some impact on our September spending.”
Commodities surge to boost ASX
Some of Australia’s largest companies are likely to receive a boost from a strong lift in commodity prices overnight.
Brent crude gained 2.9 per cent, while iron ore is up 3.7 per cent. This will likely bolster the shares of the big miners (BHP and Rio Tinto), and the oil and gas companies.
After all, the New-York listed shares of BHP and Rio Tinto have risen 1.6 per cent (to $US43.50), and 2.4 per cent (to $US49.50) respectively.
Iron ore’s rise followed the release of stronger-than-expected China manufacturing data on Thursday. China’s official manufacturing PMI (purchasing managers index) rose 0.3 points to 51.7 in August.
It will be be quiet day for Australian economic news. The key economic data to look out for today is from overseas.
This morning, the Caixin PMI (a private survey) will be released. In general, the official PMI figures (released by the Chinese government) tend to show a more optimistic result.
After the ASX closes, investors will turn their attention to US non-farm payrolls data (expected to rise by 180,000) and the ISM manufacturing index (predicted gain of 0.2 points to 56.5)