ASX futures point to a strong start to the week

The S&P/ASX 200 (XJO) increased more than 4% last week, building on strong gains in the prior week, suggesting that perhaps it is ready for a period of consolidation.

However, if overseas markets are a guide we could be in for another robust week.

US markets got off to a flying start on Monday, and the Dow is only about 7% shy of its all-time closing high.

The NASDAQ’s recovery has been even more impressive with it making a new all-time high of 9927 points, a gain of more than 3000 points in 11 weeks.

The Dow has stacked on roughly 9000 points during the same period.

To put this in perspective, the Dow took more than three years to put on 9000 points to reach its all-time high of 29,568 points just prior to the onset of coronavirus.

These gains were achieved on the back of consistently solid economic data, robust company earnings growth and a relatively stable geopolitical backdrop.

There is no sign of these three key elements being in place at the moment, and it would appear that a few pieces of promising data in the way of better than expected jobs figures, a recovering oil price and evidence of resilience in the tech sector have distracted investors from the bigger picture.

Despite these inconsistencies, it would appear that the Australian market will follow suit with the ASX SPI200 up 41 points this morning to 6138 points.

24 hours

While the ASX was closed yesterday, other activity in the Asia-Pacific region was positive with the Nikkei 225 gaining 314 points or 1.4% to close at 23,178 points.

The Hang Seng was flat, consolidating around the 24,770 point mark and the Shanghai Composite was only up marginally to 2937 points.

European markets finished in the red with the FTSE 100 down 0.2% to 6472 points.

The DAX shed 28 points to close at 12,819 points and the CAC 40 fell 0.4% or 22 points to close at 5175 points.

Strength in US markets was predominantly driven by travel and oil stocks with Boeing leading the way as it surged 12.2%.

The Dow climbed 461 points to close at 27,572 points, a gain of 1.7%.

The S&P 500 finished up 1.2% or 38 points at 3232 points.

The NASDAQ continued its winning ways, as we mentioned hitting an all-time high and closing at 9924 points, up 1.1%.

On the score of market equilibrium, movements in the CBOE Volatility Index were interesting as it reversed a consistent downtrend trend from more than 28 points at the start of the week to 23.6 points mid-session Friday — as the Dow surged more than 1000 points throughout the remainder of Friday and Monday, the volatility index increased by about 10% to 25.8 points.

Gold resilient, iron ore surges, zinc hits three month high

Despite the bullishness in equities markets gold has still managed to stay above US$1700 per ounce.

While the oil price trailed off on Monday afternoon, it is still holding around US$40 per barrel which is enough for most producers to be generating reasonable margins — bear in mind this is more than double where the price was less than two months ago.

The iron ore price has surged 5%, surpassing the US$105 per tonne mark, suggesting it could be a good day for companies such as RIO, BHP and FMG.

All base metals finished in the black, with nickel building on strong gains last week and zinc breaking through the US$0.92 per pound mark for the first time since February.