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Australian shares look set to extend yesterday’s rebound following strong gains on European markets while Wall Street was closed for a public holiday.
ASX SPI200 index futures rallied 25 points or 0.4 per cent, signalling a positive start to trade.
The S&P/ASX 200 hit a five-week low yesterday before reversing to a gain of 0.3 per cent as positive developments in the struggle against Covid-19 helped improve the market mood.
What’s driving the market
European stocks mounted a sharp rebound from three days of losses while the US enjoyed an extended weekend for Labor Day. The pan-European Stoxx 600 index climbed 1.67 per cent.
Optimism about the global economy was boosted by strong Chinese exports data. Dollar-denominated exports surged 9.5 per cent last month to the fastest pace in a year and a half. Demand for commodities was “very strong”, according to Bo Zhuang, chief China economist at TS Lombard.
A “risk-on” night saw financial services and insurers outperform, while defensive sectors trailled. Germany’s DAX climbed 2.01 per cent despite disappointing industrial production data. While total output increased for a third month, the 2.8 percent increase was short of the 4.1 per cent rise anticipated by economists, suggesting a loss of momentum in the continent’s manufacturing engine room.
Automotive manufacturers were boosted by a decline in oil (more below). Britain’s FTSE 100 climbed 2.39 per cent and France’s CAC 1.79 per cent.
“The Chinese export news helped and the absence of the US, helped erase some of the bearish sentiment that arose at the end of last week,” Connor Campbell, analyst at spreadbetter Spreadex, told Reuters.
Aussie outlook
Financial markets have stabilised while Wall Street took a long weekend, raising hopes the extended break might act as a circuit-breaker after a brutal conclusion to last week. US stocks plunged on Thursday and Friday as a rotation out of the market-leading tech sector snowballed into a broader rout. The Nasdaq dropped almost 10 per cent in two sessions before a partial recovery on Friday.
US index futures followed European stocks higher. S&P 500 futures rallied 17 points or 0.5 per cent. Dow futures rose 223 points or 0.8 per cent. The Nasdaq remained under pressure, with futures signalling a decline of 47 points or 0.4 per cent.
Bank and mining stocks led the ASX out of the doldrums yesterday, turning an opening 56-point plunge on the ASX 200 into a closing gain of 19 points or 0.3 per cent. A two-month low in new coronavirus cases in Victoria helped soften news that Melbourne’s lockdown will continue for at least seven more weeks.
The dollar marked time overnight, trading in a tight range just below 73 US cents after falling as low as 72.22 US cents on Friday. The Aussie was last down 0.04 per cent at 72.78 US cents.
August business confidence figures were scheduled for 11.30 am EST this morning.
Commodities
Iron ore pushed back towards last week’s six-year high. The spot price for ore landed in China rose $1.20 or 0.9 per cent to US$129.90 a dry ton, less than a dollar off last week’s peak. In UK trade overnight, BHP climbed 2.61 per cent and Rio Tinto 2.29 per cent.
A retreat in oil accelerated following news Saudi Arabia cut its official selling price, a sign of soft demand. Brent crude dropped $ or 1.6 per cent to US$41.99 a barrel.
“Sentiment has turned sour and there might be some selling pressure ahead,” Howie Lee, economist at Singapore’s OCBC bank, told Fox News.
Gold came under mild pressure from strength in the US dollar. Gold for December delivery was lately down 70 cents or less than 0.1 per cent at US$1,933.60 an ounce after a push above US$1,940 faltered.
“A higher dollar is weighing on gold, while longer-term uncertainties still persisting in the market is putting a floor under prices,” Carsten Menke, analyst at Julius Baer, told Reuters.
Copper was boosted by strong Chinese exports data. Benchmark copper on the London Metal Exchange rose 1.2 per cent to US$6,810.75 a tonne. Aluminium edged up 0.5 per cent, zinc 1 per cent and tin 0.4 per cent. Nickel eased 0.7 per cent and lead 0.1 per cent,
