The combination of strong jobs data and the Central bank’s willingness to stay accommodative for a long time saw the US markets smash higher over the past two sessions. For both sessions, our market was closed. So, it seems that we have a little bit of catch-up to do today.
We have been saying this for a while now. Markets have everything they could want- Fiscal Stimulus from the US, extremely accommodative central banks, and the reinsurance that rates will stay low for a long time.
Long-term bond yields have found a ceiling for now, and the US dollar has come off little which the US markets like. Crude came crashing back down which meant the energy sector was the only one in the red overnight. Tech, discretionary, and communication services did most of the heavy lifting.
Markets will continue to monitor progress with President Biden’s 2 trillion-dollar infrastructure plan. The Devil will be in the detail on how they will fund it. The increasing corporate tax, and/or Janet Yellen’s global minimum corporate tax rate.
At the end of the day, this is another 2 trillion that could hit the US economy, but this time it will be slower than sending out $1,400 checks. This will help the US economy recover over the years to come. Therefore, this will help the market remain strong in the long term.
The XJO is expected to have a strong rally this morning, opening near 6950 – our post-pandemic highs. This follows a move higher in U.S markets where they once again pushed into fresh all-time highs. In addition, U.S futures sit flat, and if they can hold their ground during our session today, we should be able to as well.
It is likely that our market does most its move on open this morning, as we are likely to be reluctant to break through 6950 in any good measure. Even if we do, the last few times we have made fresh post-pandemic highs, our market has pulled back within the coming days. On the other hand, our market is lagging behind the U.S and it feels like its about time we played catch up.
If we can clear 6950, likely with U.S markets continuing to make fresh all-time highs, our market looks set to get back to our own all-time high near 7200. Regardless, the break of the consolidation range at 6850 is welcome. If we do fail at 6950, hopefully 6850 acts as support to keep us from falling back into the channel.
Base metals were up strongly over the break and with the AUD remaining flat. This should help our miners who are due for a rally after a strong pull back the past month.
US markets have traded for two sessions since Australian markets last closed on Friday. Those two sessions saw US markets power higher, which was helped by strong economic data and company reporting. US unemployment numbers came in far better than expected on Friday, with more jobs created than expected and with the unemployment rate dropping to 6 percent, which is really quite low given the virus. Overnight we saw services data, which showed stronger growth than expected as well.
Company reporting from Tesla also buoyed markets by announcing more vehicle deliveries than expected, as did a supreme court ruling that Google didn’t infringe on patents when building the Android system. Every sector has been powering higher except for Oil & Gas, which has been hit by falling oil prices.