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A wave of optimism swept US stocks almost 4 per cent higher overnight, signalling a strong start to Australian trade.

ASX SPI200 index futures surged 109 points or 2 per cent as Wall Street celebrated progress towards a coronavirus vaccine and the promise of more economic stimulus.   

The Dow jumped 912 points or 3.85 per cent, its biggest rally in six weeks. The S&P 500 hit a ten-week high after putting on 90 points or 3.15 per cent. The Nasdaq added 220 points or 2.44 per cent.

Moderna shares flew up 20 per cent after the US biotech released positive results from a trial on humans for a potential vaccine for COVID-19. The company said all 45 trial participants developed coronavirus antibodies after two doses of its mRNA-1273 vaccine. The vaccine was reported to be safe and well tolerated. The company aims to start a phase 3 trial in July. While more than 100 potential vaccines are under development around the world, Moderna was first to release data from a human trial.

“What the market does is it tries to discount ahead,” Joe Saluzzi, co-head of equity trading at Themis Trading in the US told MarketWatch. “People are now going to anticipate the treatment, and the bets are coming in that we see an end coming in sooner rather than later.”

The other trigger for the night’s gains was a renewed pledge from Federal Reserve Chair Jerome Powell that the central bank has more tools to support the recovery. Powell forecast a steady economic revival in the US, striking a more optimistic tone in an interview with 60 Minutes than in remarks last week that unsettled investors.

“There’s a lot more we can do,” he said. “We’re not out of ammunition by a long shot. No, there’s really no limit to what we can do with these lending programs that we have.”

The night saw huge gains among companies most exposed to the economic impact of the virus. United Airlines surged 21.1 per cent, cruiseline Carnival 15.2 per cent, planemaker Boeing 12.9 per cent and MGM Resorts 10.5 per cent.   

All 11 sectors advanced. Gains ranged from 0.9 per cent for healthcare to 7.6 per cent for energy stocks as US oil closed at a two-month peak. West Texas Intermediate rallied $2.39 or 8.1 per cent to US$31.82 a barrel. Brent crude settled $2.31 or 7.1 per cent ahead at US$34.81 a barrel.

Bank stocks were boosted by the prospect of more stimulus. Citigroup put on 9 per cent, Wells Fargo 8.8 per cent and Bank of America 7 per cent. Goldman Sachs gained 5.8 per cent and JPMorgan Chase 5.3 per cent.  

Australian miners also saw big rewards. BHP’s US-listed stock jumped 8.32 per cent and its UK-listed stock 8.66 per cent. Rio Tinto added 8.05 per cent in the US and 7.75 per cent in the UK. The spot price for iron ore landed in China rose $2.90 or 3.1 per cent to US$96.15 a dry ton. On the London Metal Exchange, copper charged 2.6 per cent, aluminium 2.4 per cent, nickel 3.3 per cent, lead 4.2 per cent, zinc 3.2 per cent and 2 tin per cent.

Gold retreated from near seven-year highs as traders abandoned havens for assets more exposed to the economic recovery. Gold for June delivery settled $21.90 or 1.3 per cent lower at US$1,734.40 an ounce.

The dollar broke back above 65 US cents, lately buying 65.24 US cents.

The day ahead brings the minutes from the last Reserve Bank policy meeting at 11.30 am EST. The G7 group of nations meet tonight to discuss an economic response to the pandemic. In the US, Fed Chair Powell is due to testify before Congress.

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