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Australian stocks were poised to open higher as lockdown news out of China over the weekend added to positive leads from Wall Street and commodity markets.  

ASX futures rallied 54 points or 0.77 per cent on Friday night as US stocks surged. Iron ore, crude and copper also advanced. The dollar climbed back above 69 US cents.

Chinese authorities announced Shanghai will start to reopen today following six weeks of lockdown.

Wall Street

US stocks soared on Friday, paring heavy losses from earlier in the week amid worries central bank efforts to rein in inflation will drag the economy into recession.  

The S&P 500 climbed 94 points or 2.39 per cent. The Dow Jones Industrial Average rose 466 points or 1.47 per cent. The Nasdaq Composite soared 434 points or 3.82 per cent, its biggest percentage gain since 2020.

A broad rally lifted all 11 sectors. Roughly 19 out of every 20 stocks on the S&P 500 advanced, led by companies that suffered most earlier in the week.

Apple bounced 3.19 per cent out of bear market territory. Tesla gained 5.71 per cent, Nvidia 9.47 per cent and Meta Platforms 3.86 per cent.

“Is this a dead cat bounce? Or is it a recognition by investors, as I believe, that the sell off is overdone?” Oliver Pursche, senior vice president at Wealthspire Advisors, said.

The recovery soothed frazzled investor nerves at the end of a torrid week dominated by signs inflation may have peaked last month, but remains highly elevated. Fed Chair Jerome Powell warned bringing runaway prices under control without triggering a recession would not be simple.

“Our goal, of course, is to get inflation back down to 2% without having the economy go into recession, or, to put it this way, with the labour market remaining fairly strong,” he said in an interview with Marketplace.   

“It will be challenging, it won’t be easy. No one here thinks that it will be easy,” he added.

The S&P 500 fell to within 30 points of a technical correction on Thursday. For the week, the broadest of the main indices lost 2.4 per cent. The Nasdaq shed 2.8 per cent and the Dow 2.1 per cent.

The Dow’s seven-week losing streak is its longest since 2001. The S&P 500 and Nasdaq have both fallen for six weeks. The S&P 500’s losing run is its worst since 2011.

“There probably isn’t too much more downside risk in our opinion but we could have one more whoosh lower,” Ryan Detrick of LPL Financial said

Australian outlook

The S&P/ASX 200 looked poised to build on Friday’s rebound after Wall Street mounted a long-awaited relief rally. The Australian benchmark jumped 134 points or 1.93 per cent during the last session of a challenging week. The recovery trimmed a fourth straight losing week for Australian investors.

Whether Friday’s US bounce proves to be another bear-market bounce or the start of a genuine turnaround remains to be seen. The extreme moves of recent weeks have been more typical of bearish episodes than a healthy market. Investors need to see volatility subside and the market return to a slow upward grind.

US equity futures eased across the weekend, but not by enough to trigger alarms. S&P 500 futures dipped six points or 0.15 per cent. Dow futures dropped 33 points or 0.1 per cent.

Growth sectors dominated Friday’s US trade. Consumer discretionary bounced 4.1 per cent, technology 3.44 per cent and communication services 2.51 per cent. Energy and real estate were also notably strong, rising 3.38 and 2.55 per cent, respectively.

Positive Covid news out of China may add fuel to today’s advance. Shanghai announced businesses will be allowed to reopen today after more than six weeks of restrictions. Shopping malls, department stores and supermarkets will open their doors to foot traffic.

The changes came as Covid case numbers declined. Chinese lockdowns have weighed on commodity markets over the last month, depressing demand for Australian raw materials. Meanwhile, the threat of stricter restrictions in Beijing remains.

Saturday’s federal election may curb risk appetite towards the end of the week, especially if a hung parliament starts to look like a possibility. Markets hate uncertainty.

The week ahead brings three potentially market-moving economic reports. The minutes from this month’s RBA meeting, released tomorrow, should offer guidance to the likely trajectory for rates following the first hike in more than a decade.

Quarterly wage price data on Wednesday carry implications for inflation and rates. Thursday brings the April employment report, another key input into the Reserve Bank’s rates calculations.

Overseas, this week’s big-ticket items include a monthly economic data dump from China at 12 pm today. Wall Street has retail sales data and a speech by Fed Chair Jerome Powell tomorrow night.  

The May mini AGM season continues with meetings this week for shareholders in Telix Pharmaceuticals and Eagers Automotive (Wednesday); Woodside Petroleum and Adbri (Thursday); and AMP, Crown Resorts, InvoCare and Resolute Mining (Friday).  

Macquarie Group trades ex-dividend today. Westpac and Pendal Group go ex-dividend on Thursday.

IPOs: Southern Cross Gold lists today at 11.30 am AEST. This explorer has four projects – three in the Victorian goldfields and one near Mt Isa.

A light week for listings currently looks like this: Aurora Energy (Wednesday); Bindi Metals (Thursday); and TG Metals (Friday).

The dollar firmed up above 69 US cents this morning, lately up 0.04 per cent at 69.29 US cents.

Commodities

BHP and Rio Tinto booked solid gains in overseas trade as iron ore trimmed its worst weekly loss since February. The most-traded futures contract on the Dalian Commodity Exchange bounced 3.4 per cent.

The spot price for ore landed in northern China bounced 77 US cents or 0.6 per cent to US$130.93 a tonne. The rebound trimmed the spot price’s loss for the week to US$7.51 or 5.4 per cent.

BHP‘s US-traded depositary receipts rallied 2.52 per cent. The miner’s UK stock added 2.41 per cent. Rio Tinto gained 2.16 per cent in the US and 2.25 per cent in the UK.

Oil turned positive for the week as supply-side concerns relating to Russia outweighed demand worries reflecting Chinese lockdowns. Brent crude settled US$4.10 or 3.8 per cent ahead at US$111.55 a barrel.

The recovery lifted the global benchmark 0.8 per cent for the week. US gasoline pump prices hit a fresh record.

US gold miners rallied, even as the yellow metal slumped to a 14-week low. Gold for June delivery settled US$16.40 or 0.9 per cent lower at US$1,808.20 an ounce. The NYSE Arca Gold Bugs Index firmed 1.8 per cent.

Copper bounced off a seven-month low at the end of a week dominated by fears of a global economic slowdown. Benchmark copper on the London Metal Exchange rallied 0.9 per cent to US$9,184.60 a tonne. Aluminium improved 1.8 per cent. Nickel dropped 2 per cent, lead 1.6 per cent, zinc 1.3 per cent and tin 1.1 per cent.

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