ASX Futures Point to Higher Open

US stock markets had a strong session with the major indices climbing by around 1%. The Nasdaq 100 underperformed but still rose on the session, closing 0.25% higher. All indices sold off following the launch of another missile by North Korea but they subsequently rallied and made back the losses. Steady progress on the passage of the Republican tax bill is providing a source of hope for stock markets. New Federal Reserve Chair Jerome Powell testified before Congress and made it clear that his policy intentions are very similar to those of Janet Yellen. Market can therefore expect a continuation of the gradual rate hikes and a very slow unwinding of the Fed’s balance sheet.

Gold was volatile for the session, initially spiking on news of the missile launch but not sustaining any kind of rally and nevertheless trading within a relatively narrow range. Silver, on the other hand, fell sharply at around the time of the open of the US trading session and remained lower for the rest of the session. Silver closed 0.88% lower.

Iron ore prices are holding onto recent gains but the rally has stalled for now. BHP Billiton (BHP) announced yesterday that it expects it can lower unit costs by a further 10% across the business in the medium term which equates to savings of US$1.6bn over the next two years.

Following from the strong US leads, ASX 200 futures are up 40 points. If the Australian market follows the US higher, it is likely that the ASX 200 will break back through the 6,000 level and come close to making new ten-year highs. Although on a total return basis (including dividends) an investor would be well above where they were pre-GFC, the actual index still hasn’t exceeded the highs of 2007, reached just before the market crash. 

Data Releases:

–    US Prelim GDP 12:30am AEDT

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This article was written by William O’Loughlin – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via william.oloughlin@rivkin.com.au or by phoning +612 8302 3633.