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Stocks look set for early gains after unexpectedly strong economic data helped Wall Street claw back a portion of Wednesday’s dramatic plunge.
ASX SPI200 index futures rallied 36 points or 0.6 per cent, signalling a positive start to the final trading session of the month.
Wall Street
US stocks rebounded as reports on GDP and jobless claims exceeded expectations, and traders bought tech giants ahead of after-market earnings reports this morning.
A day after its biggest tumble in four months, the S&P 500 bounced 39 points or 1.19 per cent. The rebound recouped roughly a third of Wednesday’s 120-point plunge.
The tech-heavy Nasdaq Composite jumped 181 points or 1.64 per cent as Apple, Amazon, Facebook and Alphabet rose ahead of quarterly updates. The Dow Jones Industrial Average climbed 139 points or 0.52 per cent, regaining less than a sixth of Wednesday’s 943-point loss.
The early signs from this morning’s after-market reports appeared broadly positive: Alphabet rose 5.9 per cent in volatile after-market trade and Apple and Facebook gained 0.1 per cent. Amazon dropped 1.7 per cent.
GDP data showed the US economy roared back harder than economists expected last quarter. The economy grew at an astonishing annual rate of 33.1 per cent, fuelled by a government stimulus program that ended in August. Economists polled by Dow Jones expected growth of around 32 per cent. The bounceback followed a slump of 31.4 per cent in the three months to the end of June. First-time claims for unemployment benefits also surprised, falling last week to a seven-month low of 751,000.
“The initial recovery in GDP after the first wave of lockdowns were lifted was stronger than we originally anticipated,” Paul Ashworth, chief US economist at Capital Economics, told CNBC. “But, with coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower.”
European markets stabilised after Wednesday’s heavy falls, triggered by renewed lockdowns in France and Germany. The pan-European Stoxx 600 finished 0.12 per cent lower. Markets in France and the UK finished near flat. Germany’s main index bounced 0.32 per cent.
Australian outlook
Barring a negative response to this morning’s after-market updates from US Big Tech, the S&P/ASX 200 should regain some of the ground it has lost this week. The index has fallen roughly 3.4 per cent since Monday, climaxing with a 1.6 per cent plunge yesterday.
This week’s falls have come as the spread of Covid-19 weighed on the economic prospects for Europe and the US. With stimulus measures in place, Covid under control and the possibility of another rate cut next month, Australia looks well positioned to ride out the current turmoil better than most developed economies.
“From an economic standpoint, we’re in a much better place. This puts us in a strong position to outperform other global indices should they experience further falls,” ThinkMarkets Market Analyst Carl Capolingua said.
“We’re heading into the weekend, and we’re heading into a US Presidential Election next week, so there are lots of reasons to stay on the sidelines for at least a few more sessions. If we can get a clean result in the Election, that little bit of certainty should be enough to generate a bounce. If we don’t get a clean result, then it could be a tough run into the end of the year.”
The night’s best-performing sectors in the US were energy (+3.2 per cent), communication services (+2.9 per cent) and materials (+2.2 per cent). Tech stocks gained 1.9 per cent and financials 0.7 per cent. The defensive health sector recorded the only decline, falling 0.7 per cent.
The dollar remained under pressure from defensive buying of the greenback. The Aussie declined 0.24 per cent to 70.38 US cents.
Commodities
Energy stocks rebounded in the US despite further weakness in oil. Brent crude settled $1.47 or 3.8 per cent lower at US$37.65 a barrel, its lowest close since late May.
Gold stocks also traded against the trend in the underlying commodity. The NYSE Arca Gold Bugs Index bounced 1.9 per cent a day after tumbling 7.1 per cent. Gold for December delivery settled $11.20 or 0.6 per cent lower at US$1,868 an ounce.
BHP’s US-listed stock edged up 0.84 per cent after its UK-listed stock lost 0.11 per cent. Rio Tinto jumped 2.22 per cent in the US and 1.59 per cent in the UK. The spot price for iron ore landed in China eased 70 cents or 0.6 per cent to US$116.25 a tonne.
A mixed night on the London Metal Exchange saw benchmark copper ease 0.2 per cent to US$6,716.50 a tonne. Aluminium closed flat. Nickel lost 1.3 per cent and tin 0.6 per cent. Lead gained 2.7 per cent and zinc 0.1 per cent.
