Tentative early signs of a return to normal economic life helped Wall Street kick higher overnight, setting up Australian stocks for a modestly positive open.
ASX SPI200 index futures edged up five points or 0.1 per cent to 5313 as several US states eased coronavirus lockdown restrictions. Wall Street shrugged off further turmoil in oil markets, where ongoing storage problems helped drag the US crude benchmark down almost 25 per cent.
Stocks that stand to benefit most from easing restrictions rallied hardest as the S&P 500 put on 42 points or 1.47 per cent. Cruise companies, casinos and high-street chains spearheaded the advance after states such as Texas, Alaska, Georgia, South Carolina and Tennessee declared restaurants could re-open.
“There’s cautious optimism that the economy across the country is moving toward restarting,” Robert Pavlik, chief investment strategist at SlateStone Wealth in the US, told Reuters. “The market is looking out six to nine months. But there are a number of things that could push that optimism right out the window, primarily a sharp spike in the number of COVID-19 cases.”
Several other US states outlined timetables to reactive dormant parts of the economy. Spain, Italy, France and Belgium laid out plans to lift some restrictions. Here, Queensland and Western Australia announced over the weekend they would take steps this week to loosen social distancing rules.
The decision to re-open parts of the American economy came as the global infection rate passed three million and the number of deaths in the US reached 53,922. Almost a million Americans have caught the virus.
The Dow climbed 359 points or 1.51 per cent as 24 out of its 30 component companies made gains. Disney, 3M and JPMorgan Chase were the best performers, all adding at least 4.3 per cent. Consumer health company Procter & Gamble was the worst of the pack with a decline of 1.3 per cent. The Nasdaq tacked on 96 points or 1.11 per cent. Tesla jumped 10.2 per cent on news workers will return to making cars at the company’s main California factory next week.
This week is the busiest in this quarterly earnings season and brings updates from 140 S&P 500 companies and 12 Dow components, including global bellwethers such as Caterpillar, Boeing, Apple, Facebook and Amazon. Average earnings have fallen 22.7 per cent among the 122 S&P 500 companies that have reported so far. Tonight brings updates from Alphabet, 3M, Caterpillar, Merck and Ford.
Energy stocks have grown more resilient to ructions in crude markets. The sector gained 2.1 per cent despite a $4.16 or 24.6 per cent dive in West Texas Intermediate to US$12.78 a barrel. Brent crude settled $1.45 or 6.8 per cent lower at US$19.99 a barrel.
“There is a backlog and a wall of crude that the market just can’t look beyond as global storage hubs fill up,” Phil Flynn, senior market analyst at The Price Futures Group said. “Tankers filled with oil floating in the ocean with no place to go and producers cutting but not fast enough to overcome the most significant demand destruction event in the history of the globe.”
No such problems on other commodity markets, where copper hit a six-week high and iron ore continued to hold above US$80 a tonne. BHP’s US-listed stock put on 1.1 per cent and its UK-listed stock 2.3 per cent. Rio Tinto gained 0.84 per cent in the US and 0.28 per cent in the UK. The spot price for iron ore landed in China eased 50 cents or 0.6 per cent to US$83.40 a dry ton.
Copper climbed as much as 2.5 per cent before closing 1 per cent ahead on the London Metal Exchange at US$5,171 a tonne. Lead advanced 1.2 per cent, zinc 1.1 per cent and tin 3.9 per cent. Nickel closed steady. Aluminium gave up 0.6 per cent.
Gold dipped as hopes for economic recovery dented demand for havens. Gold for June delivery settled $11.80 or 0.7 per cent weaker at US$1,723.80 an ounce.
The dollar held recent gains at 64.64 US cents.
Australian stocks jumped 1.5 per cent yesterday after WA and Queensland announce plans to ease social distancing regulations. Quarterly updates are due today from several gold miners, including St Barbara, Saracen and Northern Star. Wall Street has consumer confidence data scheduled tonight, as well as a raft of corporate earnings reports.