Record night on Wall Street to boost ASX

Shares looks set to open modestly higher despite a steep slide on Wall Street as an emergency stimulus package stalled in Congress.

Index futures indicate an opening rise of around 39 points or 0.9 per cent after the ASX 200 foreshadowed a tough night in the US during a 270-point or 5.4 per cent plunge yesterday. The benchmark local index fell as much as 8 per cent in a bruising start to the week after the government closed down swathes of the domestic economy to contain the spread of the coronavirus.  

A night of unprecedented actions by the US Federal Reserve was overshadowed by a creeping wave of state lockdowns and the failure of a second vote in the Senate on a trillion-dollar stimulus package. US stocks twice edged close to positive territory before falling away as the steady drip of bad news continued.

The S&P 500 ended the session 68 points or 2.93 per cent in the red. The Dow gave up 582 points or 3.04 per cent. The Nasdaq shed 19 points or 0.27 per cent.

The Fed announced a range of new measures in a bid to shore up the stalling US economy that went far beyond anything it has tried in the past. The central bank will buy corporate bonds for the first time, lend against student loans, offer direct loans to companies and roll out a credit program to small and medium-sized businesses.

“It’s their bazooka moment,” Russell Price, chief economist at Ameriprise Financial Services in the US, told Reuters. “It’s their ‘We’ll do whatever it takes’ moment, which should be a sign to financial markets and investors that the Fed will provide any and all liquidity necessary to support the economy through this period.”

The news briefly stemmed the market's downward drift after Ohio, Louisiana, Maryland and Delaware joined California and New York in asking their citizens to stay home. Also weighing on sentiment was a delay in passing a massive congressional stimulus package. Negotiations continued overnight after the bill failed a procedural vote in the Senate as Democrats complained that a US$500 billion fund for distressed businesses amounted to a corporate bailout with no strings attached. Stocks clawed back some losses mid-afternoon after Senate Democratic Leader Chuck Schumer said the two sides were very close to a deal.

Energy stocks led the retreat, falling 6.7 per cent as traders responded to Friday's 13 per cent dive in oil. Overnight, Brent crude steadied after a precipitous plunge that has seen it lose almost half its value in four weeks. The global benchmark edged up five cents or 0.2 per cent to US$27.03 a barrel. The US benchmark bounced 73 cents or 3.2 per cent to US$23.36.

As with here yesterday, financial stocks were pummelled, slumping 6.1 per cent amid expectations of a surge in bad debts as the economy hits a brick wall. Defensive sectors fared little better, real estate falling 5.6 per cent, utilities 5.3 per cent and health 5 per cent.

Mining stocks were mixed as last week's sudden dive in iron ore accelerated. BHP's US-listed stock rose 0.79 per cent, but its UK-listed stock shed 0.34 per cent. Rio Tinto gave up 0.41 per cent in the US and 3.49 per cent in the UK. The spot price for iron ore landed in China tanked $6.35 or 7.3 per cent yesterday to US$80.20 a dry ton.

Gold staged its biggest dollar rally on record as the greenback weakened in the wake of the massive Fed spending program. Gold for April delivery settled $83 or 5.6 per cent higher at US$1,567.60 an ounce.

Chinese copper hit an 11-year low yesterday. Prices on the Shanghai Futures Exchange fell 3.1 per cent. In the UK, the London Metal Exchange's famous open-outcry ring closed for the first time since World War Two. Benchmark copper fell 3.8 per cent to US$4,626.50 a tonne as the exchange moved to full electronic trade to contain the spread of the virus. Aluminium and nickel shed 0.9 per cent,  zinc 1.4 per cent, tin 1.8 per cent and lead 1.8 per cent.

The dollar eased 0.17 per cent to 57.88 US cents.

The day ahead brings domestic services and manufacturing reports that may show the first signs of the economic hit from the Covid-19 virus.  Services and manufacturing reports are also due later today in Europe and the US. President Donald Trump is expected to address US media this morning.  


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