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The ASX looks set to open modestly higher after pre-empting a strong rebound on Wall Street as investors awaited details of stimulus packages.
Australian index futures finished 34 points or 0.6 per cent ahead at 5999 following a volatile session as US stocks waxed and waned ahead of a mooted White House press conference later this morning. The ASX 200 yesterday anticipated a strong night in the US, rising 179 points or 3.1 per cent after news of a US stimulus plan first broke.
The wild ride for investors continued overnight, with the major US indices opening more than 3 per cent ahead, sinking to lunchtime losses, then rebounding into the close. The prospect of measures to alleviate the economic impact of the Covid-19 virus outbreak helped the S&P 500 finish on a high. The benchmark index gained 136 points or 4.94 per cent, clawing back more than half of Monday’s 226-point horror plunge. The Dow put on 1,167 points or 4.89 per cent and the Nasdaq 394 points or 4.95 per cent.
“Fiscal stimulus is the antidote that can bridge the gap between what was happening before coronavirus and what will happen after it,” Brent Schutte, chief investment strategist for Northwestern Mutual Wealth Management in the US, told CNBC. “It certainly can’t cure the virus, but it can help contain some of the economic fallout.”
Financial markets plummeted this week after an international deal to cap crude production collapsed, raising fears of a full-blown oil price war at a time when markets were struggling under the effects of the virus epidemic. On Monday, Wall Street suffered its biggest fall since 2008. Australia briefly entered bear market territory yesterday – a drop from a high of more than 20 per cent – before rebounding.
Once again, investors are pinning their hopes on assistance from central banks and governments. Wall Street pulled out of last night’s slump after the Wall Street Journal reported the White House wants to suspend payroll tax for 90 days. Trump also called for the Federal Reserve to lower interest rates even further after last week’s emergency 50 basis points cut. The president announced yesterday he would hold a press conference today to reveal details of his plan, but later reports suggested the “substantial” and “dramatic” package was still in the early stages of development. The Morrison government is expected to unveil an Australian stimulus package tomorrow.
Risk was back on, with the tech and financial sectors both rallying more than 6 per cent, while utilities, health and consumer staples trailled the broader market. Apple, JPMorgan Chase and Home Depot were the Dow’s best performers.
The energy sector bounced 5 per cent as oil rebounded from its heaviest fall since the 1991 Gulf War. Brent crude settled $2.86 or 8.3 per cent higher at US$37.22 a barrel. The US benchmark gained 10.4 per cent.
The rally in Australia’s biggest miners that started here yesterday stuttered in the UK before regaining momentum in the US. BHP’s US-listed stock put on 8.29 per cent after a tepid 1.58 per cent rise in the UK. Rio Tinto surged 9.52 per cent in the US and 3.39 per cent in the UK. The spot price for iron ore landed in China bounced $4.20 or 4.8 per cent to US$91.40 a dry ton.
Copper rallied amid signs that the coronavirus outbreak was easing in leading consumer China. Benchmark copper on the London Metal Exchange rose 0.6 per cent in final open-outcry trading to US$5,566 a tonne. Aluminium improved 0.6 per cent, nickel 0.2 per cent and tin 1.1 per cent. Lead eased 0.3 per cent and zinc 0.2 per cent.
Gold declined for the first time in four sessions as bond yields climbed off historic lows. Gold for April delivery settled $15.40 or 0.9 per cent weaker at US$1,660.30 an ounce.
The dollar tumbled more than 1.5 per cent overnight to 64.85 US cents.
Deputy RBA Governor Guy DeBelle is due to address a Sydney summit this morning and answer questions from the audience. Monthly consumer sentiment figures are due at 10.30 am EST. Wall Street has inflation data slated for tonight.
