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ASX Today: ASX caps off worst week since GFC with more losses

A new financial year looks set for a cautious start despite positive leads after Wall Street added fresh gains to its best quarter in more than 20 years.

ASX SPI200 index futures eased seven points or 0.1 per cent, signalling wariness following yesterday's bumper session. The S&P/ASX 200 closed out the old tax year with a surge of 83 points or 1.43 per cent.

The retreat in futures suggest index traders think at least some of yesterday's gains were end-of-quarter/financial-year window dressing that could unwind this morning. The S&P/ASX 200 declined 11 per cent during a tumultuous 2019-20 tax year despite a 16.2 per cent rebound in the final quarter.

US stocks ended a spectacular quarter on a high note. The S&P 500 climbed 47 points or 1.54 per cent overnight to push its quarterly gain near 20 per cent. That was the index's best quarterly advance since 1998.

The Dow put on 217 points or 0.85 per cent. The Nasdaq added 185 points or 1.87 per cent. The Dow's quarterly tally of 17.8 per cent was its biggest since 1987. The Nasdaq soared 30.6 per cent during its best quarter since the original dot.com boom in 1999.

Financial markets have lost momentum over the last two weeks following surges in COVID-19 infections in the US and other parts of the world. Victoria yesterday announced it would reimpose lockdown restrictions on ten Melbourne postcodes where the virus has flared in recent days.

“A combination of 1) Stimulus, 2) Positive trends in the virus, 3) Economic reopenings and 4) Hopes for a vaccine drove stocks higher in Q2,” Tom Essaye, founder of The Sevens Report, wrote in a note to clients quoted on CNBC. “As we begin Q3, only one of those tailwinds is currently in place: stimulus. That doesn’t mean we’ll see a correction, but be suspect of market rallies until we can add more forces supporting stocks.”

There was a whiff of window dressing about last night's US rally, with most of the gains coming in the final hour of trade. The Dow was flat as late as 3pm New York time.

Market bulls were cheered by positive economic data. A measure of consumer confidence climbed to a three-month high of 98.1 last month from a May reading of 85.9. However, commentators noted that the survey was carried out by June 18, before the worst of the recent virus flare-ups in the US. A separate report showed house prices rose 4 per cent year-on-year in April, suggesting real estate prices were riding out the pandemic.

Federal Reserve Chair Jerome Powell warned the outlook for the US economy was "extraordinarily uncertain" and largely dependent on success in containing the virus. He called on government to take more action to provide relief and support the recovery.

All 11 US sectors rose. Gains ranged from 0.4 per cent for utilities, up to 2.2 per cent for energy as Brent crude eased 56 cents or 1.3 per cent to settle at US$41.15 a barrel. A memorable quarter for oil traders saw US oil turn negative for the first time ever during a storage crisis as crude supplies piled up with nowhere to go. Despite that episode, US crude eventually rebounded 92 per cent for the quarter. The global benchmark, Brent, bounced 81 per cent.

The NYSE Arca Gold Bugs index jumped 3.5 per cent as gold recorded its highest close since 2011. Gold for August delivery settled $19.30 or 1.1 per cent ahead at US$1,800.50 an ounce. The precious metal last settled higher in September 2011 on the way down from the all-time settlement high of US$1,891.90.

A rebound in iron ore and a milestone night for copper helped BHP and Rio Tinto advance in overseas trade. BHP's US-listed stock put on 1.53 per cent and its UK-listed stock 0.32 per cent. Rio Tinto added 1.06 per cent in the US and 0.24 per cent in the UK. The spot price for iron ore landed in China bounced $1.35 or 1.4 per cent to US$101.05 a dry ton. Benchmark copper on the London Metal Exchange advanced 0.9 per cent to US$6,004.50 a tonne.

The dollar regained the 69 US cent level, lately buying 69.02 US cents.


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