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

A record close on Wall Street points to a positive start to the Australian trading week.

ASX SPI200 index futures climbed 51 points or 0.8 per cent as the S&P 500 finished a strong week at an all-time high.

Wall Street

Positive corporate earning updates and optimism over a Covid-19 vaccine overshadowed rising infection and hospitalisation rates in the US. The S&P 500 rose 48 points or 1.36 per cent to close above its old February peak.

The Dow Jones Industrial Average gained 400 points or 1.37 per cent. The Nasdaq Composite added 120 points or 1.02 per cent.

Investors continue to reposition for a post-pandemic economic revival. The S&P 1500 Airlines Index surged 5.4 per cent. Planemaker Boeing gained 5.9 per cent. Cruise company Carnival added 7.2 per cent. Energy, industrials, materials and financials were among the top five sector performers, gaining between 1.6 and 3.8 per cent. Value indexes outperformed growth indexes.

Disney climbed 2.1 per cent as the success of Disney Plus partly offset the impact of theme park closures. Cisco jumped 7.1 per cent after the work-from-home economy helped the company smash earnings expectations.

"Sentiment regarding the potential for vaccines combined with very strong earnings announcements from a number of companies has investors hopeful that the economy can continue to recover,” Michael Arone, chief investment strategist at State Street Global Advisors, told Reuters.

The Dow put on 4.1 per cent during a week that started with a bang when Pfizer and BioNTech announced their experimental coronavirus vaccine was 90 per cent effective in late-stage trials. The S&P 500 gained almost 2.2 per cent. The Nasdaq shed 0.6 per cent as investors favoured trailing sectors with more potential upside over Big Tech.

President Donald Trump's faint hopes of retaining the presidency dwindled further after US networks called Georgia for Joe Biden. The challenger's victory extended his lead to 306 electoral votes to 232 after Trump won North Carolina. Georgia and North Carolina were the final states to be called.

Australian outlook

The S&P/ASX 200 looks set to start the week near an eight-month high following two weeks of strong gains. The index gained 3.5 per cent last week and more than 8 per cent over two weeks. The clouds have cleared significantly for investors over the last few weeks, according to ThinkMarkets Market Analyst Carl Capolingua.

"We have a clear winner in terms of a US President, and in my opinion very little scope for disputing that, and the very pleasant surprise of a potentially effective vaccine which is likely to be distributed in early 2021," he said. "We had a really favourable budget, and the RBA has dropped rates and announced a quantitative easing program. We've also had a number of solid quarterly trading updates. So, if there is a risk here, it's that all of the good news is already in the market.".

The share market looks the only place to obtain a decent return on your money, he added. "We saw CBA drop rates on a number of savings accounts [on Friday]. That trend is going to continue. Bond yields are low, and the RBA wants them to stay there. So, there's really very few alternatives to the share market if you want a decent yield at the moment."

Trade concerns were partly addressed over the weekend with news Australia joined 14 other countries in signing a comprehensive Regional Comprehensive Economic Partnership. Other signatories included China, New Zealand, Japan, South Korea and ten ASEAN nations. It remains to be seen whether the deal will alter China's recent persecution of Australian exports.

The Reserve Bank will be front and centre for much of the week. Governor Philip Lowe addresses a webinar tonight on the central bank's policy reaction to Covid, then participates in a panel discussion on Wednesday. The minutes from this month's policy meeting are due tomorrow. Assistant Governor Chris Kent is due to speak tomorrow at a symposium.

Other potential market-movers this week include Thursday's October jobs report and today's monthly update on Chinese factory activity, retail sales and employment. Wall Street is fairly light on economic data this week.

The dollar has been stuck in the 72-73 US cents trading range for more than a week. The Aussie this morning edged up 0.02 per cent to 72.71 US cents.

Commodities

Oil rose more than 8 per cent last week despite a setback on Friday. Brent crude settled 75 cents or 1.7 per cent lower at US$42.78 a barrel on Friday. Prices gained 8.4 per cent over the week amid optimism that this week's OPEC+ meeting will extend production curbs due to end in January.

A challenging week for gold traders ended with an uptick in precious metals. Gold for December delivery settled $12.90 or 0.7 per cent ahead at US$1,886.20 an ounce. The NYSE Arca Gold Bugs Index of US miners inched up 0.7 per cent. The yellow metal lost 3.4 per cent last week as havens fell out of favour.

Iron ore landed in China trimmed its gain for the week to around 4 per cent. The spot price eased 75 cents or 0.6 per cent on Friday to US$122.65 a tonne.

BHP and Rio Tinto advanced in US action after retreating in UK and Australian trade. BHP's US-listed stock added 1.61 per cent after its UK-listed stock eased 0.27 per cent. Rio Tinto added 0.73 per cent in the US and shed 0.69 per cent in the UK.

Copper continued to push towards the US$7,000 a tonne level. Benchmark copper on the London Metal Exchange rose 0.7 per cent to US$6,966.30 a tonne. Aluminium and zinc added 0.2 per cent. Tin gained 0.5 per cent. Nickel dropped 0.3 per cent and lead 0.4 per cent.


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