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ASX gains with iron ore price jump lifting miners

piggy bank with crypto written on it and a bitcoin being deposited

Dip buyers spurred markets higher on Wednesday, bringing on the Santa rally, but analysts are urging caution ahead of the FOMC meeting on December 14 and 15 next week.

The S&P/ASX 200 closed up Wednesday, gaining 91.50 points, or 1.25%, to 7405.40 and crossing above its 125-day moving average.

Zip Co lifted 11% and Mesoblast was almost 10% higher to lead the gains, taking the index up 2.3% over the past five sessions.

US futures are indicating gains when markets open there.

On US markets overnight, thoughts that the latest omicron covid variant will not be as severe as previous strains and will not damage economic recovery as much as first expected sparked short covering and a scramble to buy after a few weeks of losses.

The Dow Jones Industrial Average rose 1.4%, the S&P 500 advanced 2.1%, and the Nasdaq jumped 3%.

December tends to be a very strong month for equities. The S&P 500 and Dow historically have risen in December. The ASX 200 is higher for this month so far, and gained in December 2020, but had negative Decembers in 2019 and 2018. The six years before those, however, the month of December saw gains.

Bank of America’s technical equity strategist Stephen Suttmeier forecast one last push higher for the S&P 500 in the first half of 2022 before a second-half retreat.

The bank’s secular bull market overlay charts for the S&P 500 show resistance in the upper 4000s to low 5000s into early 2022 and support into the low 4000s into the second half of 2022 and even into 2023.

The S&P 500 is up almost 27% so far in 2021.

The FOMC meets December 14-15 with the Federal Reserve expected to accelerate the end of quantitative easing and look to raise interest rates, moves that could concern markets.

Goldman Sachs is warning dip buyers to proceed with caution amid the Fed’s hawkish tone, just as omicron spreads.

Bitcoin continues to hold above $50,000, as the world’s largest cryptocurrency by value continues to recover after a selloff at the weekend.

Locally, iron ore miners BHP, and Rio Tinto were more than 2% higher at the close and Fortescue Metals Group gained +3% after iron ore prices consolidated above $100 a tonne, hitting $107, a level last seen in late October.

Macquarie Research prefers BHP as a large-cap exposure, but remains positive on both Rio Tinto and Fortescue. Mineral Resources and Champion Iron are the broker’s key, mid-cap picks.

Oil Search and Santos have received approval from the Independent Consumer and Competition Commission of Papua New Guinea regarding their merger. The merger remains subject to certain conditions, including court approval and the satisfaction or waiver of certain other customary conditions.

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