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A positive result for a treatment for COVID-19 fuelled substantial gains on Wall Street, setting up Australian shares for a strong open.   

ASX SPI200 index futures rallied 108 points or 2 per cent after a US trial showed Gilead Sciences’ remdesivir antiviral drug cut the recovery time for patients infected with the virus. The White House’s top health adviser said the drug set a new standard of care in the fight against the pandemic.

Dire GDP data was overlooked as the market responded to unexpectedly strong earnings from Alphabet and a Federal Reserve pledge to sustain the economy. The S&P 500 surged 76 points or 2.66 per cent to extend its gains this month to more than 13 per cent. Barring a major setback tonight, the index is on track for its best monthly return since 1974. The Dow climbed 532 points or 2.21 per cent. With tech mega-caps leading the rally, the Nasdaq put on 307 points or 3.57 per cent.

The market opened at a gallop after a government-run clinical trial of remdesivir met its main goal. The trial showed the median recovery time for patients taking the drug was 11 days, versus a 15-day recovery time for a placebo group. White House health adviser Dr Anthony Fauci said the trial result was “quite good news”.

“This will be the standard of care,” Fauci said. “What it has proven is a drug can block this virus.”

Gilead shares jumped 5.9 per cent. The stock price has been on a rollercoaster ride after early hopes for the treatment were dampened by the accidental release of preliminary data from a Chinese trial that appeared to show the drug was ineffective against COVID-19.

The Federal Reserve said it will hold its key rate at its current level of zero to 0.25 per cent until inflation reaches 2 per cent and full employment returns. In a post-policy meeting statement the Fed said the health crisis will “weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term”.

“We’re going to not be in any hurry to withdraw these measures,” Fed Chairman Jerome Powell told reporters. “We’re going to wait until we’re quite confident that the economy is well on the road to recovery.”

A better-than-expected quarterly update from Google parent company Alphabet raised hopes for other tech giants due to report this week. Alphabet shares jumped 8.9 per cent, Facebook 6.2 per cent, Apple 3.3 per cent and Amazon 2.5 per cent. Electric carmaker Tesla surged 8.8 per cent in after-hours trade this morning after surprising the market with a first-quarter profit. Microsoft and Facebook also saw strong gains after releasing results.

The market paid little heed to the biggest collapse in US economic growth since the GFC. Gross domestic product shrank 4.8 per cent, worse than the 3.5 per cent predicted by economists surveyed by Dow Jones.

Energy again topped the sector gains with a surge of 7.4 per cent after US crude climbed 22 per cent. West Texas Intermediate for June delivery settled $2.72 or 22 per cent ahead at US$15.06 a barrel. Brent crude gained $2.08 or 10.2 per cent to settle at US$22.54. The rally came amid hopes that a treatment for COVID-19 might encourage countries to lift restrictions, reviving demand for oil.

Mining stocks marched higher. BHP’s US-listed stock put on 5.43 per cent and its UK-listed stock 5.13 per cent. Rio Tinto added 4.07 per cent in the US and 4.53 per cent in the UK. The spot price for iron ore landed in China edged up 20 cents or 0.2 per cent to US$82.60 a dry ton.

Base metals gained on signs Chinese demand had picked up after the pandemic slowdown. Benchmark copper on the London Metal Exchange rose 0.7 per cent to US$5,233 a tonne. Aluminium gained 0.1 per cent, nickel 0.2 per cent, lead 0.3 per cent and zinc 0.8 per cent. Tin slid 0.6 per cent.

Gold settled in the red but caught a late lift from the Fed’s pledge to keep interest rates low. Gold for June delivery settled $8.80 or 0.5 per cent weaker at US$1,713.40 an ounce. but was lately up $7.10 or 0.4 per cent at US$1,729.30.

The dollar extended its recent revival against a falling greenback, climbing 1 per cent to 65.55 US cents.

The S&P/ASX 200 looks set to recover most of the losses it suffered during last week’s “oil shock” global retreat when the price of US crude turned negative for the first time in history. The benchmark Australian index rallied 1.5 per cent yesterday as the big banks rebounded from bad news earlier in the week.

The day ahead brings Chinese manufacturing and services data at 11 am EST, and Australian private sector credit figures half an hour later. The European Central Bank releases a policy statement tonight. Wall Street will brace for the latest unemployment benefits data and a report on personal spending. One of the biggest nights of this earnings season includes reports from Apple, Amazon, McDonald’s, Twitter, Visa, United Airlines and Gilead Sciences.

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