Delta Airlines and oil prices boost Wall Street to new records

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Updated

January 12, 2018 08:47:16

Australian shares are headed for a flat open, though it may get boosted after an overnight surge in oil and iron ore prices.

Market snapshot at 8:15am (AEDT):

  • ASX SPI 200 futures +0.1pc at 6,019, ASX 200 (Thursday’s close) -0.5pc at 6,068
  • AUD: 78.91 US cents, 58.29 British pence, 65.56 Euro cents, 87.72 Japanese yen, $NZ1.09
  • US: Dow Jones +0.8pc at 25,575, S&P 500 +0.7pc at 2,768, Nasdaq +0.8pc at 7,212
  • Europe: FTSE +0.2pc at 7,763, DAX -0.6pc at 13,203, Euro Stoxx 50 -0.4pc at 3,597
  • Commodities: Brent crude -0.1pc at $US69.16/barrel, spot gold +0.4pc at $US1,322/ounce, iron ore +1pc at $US79.08/tonne

Wall Street is also providing a strong lead for the ASX, with US stocks on track to finish at new records.

The Australian dollar jumped 0.6 per cent against the greenback, and is buying 78.9 US cents.

Meanwhile, gold has risen to a four-month high of US$1,323 an ounce.

Brent crude oil surged to $US70 a barrel overnight, but has since settled down to $US69.15 (which is still a three-year high).

Renewed optimism

The Dow Jones, S&P 500 and Nasdaq have all experienced gains of at least 0.7 per cent each.

Yesterday, the three Wall Street indexes fell together for the first time in 2018 — after investors were rattled by a Bloomberg report that China would slow, or even end, its US government bond purchases.

Bloomberg’s report was dismissed as “fake news” by China’s State Administration of Foreign Exchange, in a statement published on its website.

“The news could quote the wrong source of information, or may be fake news,” it said.

However, investors have found other sources of optimism. driving the US market to its highest-ever levels.

They even shrugged off weak economic figures showing that US producer prices fell (-0.1pc) last month for the first time in nearly 1.5 years.

This was against the background of declining costs for services, which could temper expectations that inflation will accelerate in 2018 — which would not please the Federal Reserve.

Upbeat earnings and record oil prices

Oil prices hit a three-year high, which boosted the American energy sector (+2.3pc), making it the strongest S&P sector by far.

Some of the best-performing stocks in the energy space were Chevron (+3.1pc) and Exxon Mobil (+1pc).

Delta Airlines bolstered the industrial sector (+1.2pc), after the company posted fourth-quarter earnings which beat market expectations — sending the airline’s share price 4.8 per cent higher.

America’s second-largest carrier said its results were helped by higher business fares and a busy holiday travel season.

The airline also forecast an even stronger performance for the current quarter, as it anticipates a double benefit from the US corporate tax cut this year.

“We’re very excited about the potential for increased business demand with the tax cuts,” Delta’s president Glen Hauenstein told analysts in a conference call on Thursday (New York time).

“We haven’t seen that materialise yet, but we expect that to materialise in the first quarter.”

Delta expects to save money on its own bills, plus an uptick in business travel as other companies use tax savings to invest in generating new business.

“The unifying factor of today’s move and this whole week is a heightened confidence in the pace of economic activity,” said Scott Clemons, chief investment strategist at Brown Brothers Harriman.

“That helps explain the demand picture which has oil up at $70.”

The reporting season will kick off in earnest tomorrow, with results from the big US banks JP Morgan and Wells Fargo.

Earnings for S&P 500 companies are expected to increase by about 12 per cent on average, with the biggest contribution from the energy sector, according to Reuters data.

Topics:

stockmarket,

company-news,

economic-trends,

currency,

australia

First posted

January 12, 2018 07:58:36



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