The share market has a shot at back-to-back advances for the first time since the start of the coronavirus meltdown following the Dow’s best night since 1933.
A massive rebound on global markets saw US and European benchmarks rise more than 8 per cent overnight in anticipation of a US fiscal stimulus package. The Dow put on an extraordinary 2,113 points or 11.37 per cent.
Australian index futures surged 278 points or 5.9 per cent, positioning the market to extend yesterday’s 190-point advance. The ASX 200 has not managed consecutive rallies since its all-time high on February 20, when the Covid-19 virus was still seen as a Chinese problem of minor interest.
US stocks rebounded from three-year lows as politicians narrowed their differences on a US$2 trillion stimulus package mired in congressional wrangling. Democrat House Speaker Nancy Pelosi said there was “real optimism” a deal would be reached shortly. Senate Minority Leader Chuck Schumer said the agreement was on the “two-yard line”, an American sports euphemism for being close to completion. The agreement is expected to cushion American workers and businesses from job losses and an expected collapse in economic activity from lockdowns triggered by the virus.
US stock indices reversed two days of heavy losses, with the Dow regaining the psychologically-important 20,000 level and recording its biggest percentage gain since 1933. The broader S&P 500 rose 210 points or 9.38 per cent. The Nasdaq put on 557 points or 8.12 per cent.
“From a market perspective… it feels like we’re coming to the end of it,” Michael Novogratz, CEO of Galaxy Digital, told CNBC. “It doesn’t necessarily mean the market’s going to go up, but a lot of that crazy volatility is kind of coming out.”
Market bulls were encouraged by signs President Donald Trump wants to re-open the economy as soon as possible. “I would love to have it open by Easter,” Trump told reporters.
A House of Representatives proposal to bail out airlines and their contactors helped lift the S&P 500 Airlines Industry Index 19.4 per cent. An index of banks rose 13.4 per cent. Tourism stocks also recorded double-digit gains.
Energy was the pick of the sectors, climbing 16.3 per cent despite a comparatively subdued response in oil markets. Brent crude settled 12 cents or 0.4 per cent higher at US$27.15 a barrel as traders anticipated a long road back to recovery for the global economy.
Defensive sectors underperformed but still recorded solid gains. Consumer staples trailed with a rise of 4.8 per cent, telecoms 5.8 per cent and health 7.6 per cent.
European stocks surged after Italy reported new infections and deaths declined for a second day, raising hopes the crisis there has peaked. The pan-European Stoxx 600 jumped 8.4 per cent as the German benchmark gained 10.98 per cent, Britain’s FTSE 9.05 per cent and Italy’s FTSE MIB 8.93 per cent.
Iron ore rebounded, setting up the big Australian miner for double-digit gains in overseas trade. BHP’s US-listed stock charged 14.94 per cent and its UK-listed stock 16.51 per cent. Rio Tinto flew up 15.79 per cent in the US and 14.69 per cent in the UK. The spot price for iron ore landed in China bounced $4.10 or 5.1 per cent yesterday to US$84.30 a dry ton.
Gold lodged a second day of extraordinary gains, benefitting from fears of the inflationary impact of a US Federal Reserve commitment to buy an unlimited quantity of treasuries and mortgage-backed securities. Gold for April delivery settled $93.20 or 6 per cent higher at US$1,660.80 an ounce. The dollar gain was the largest on record going back to 1984.
Industrial metals rebounded as mines closed to combat the virus, signalling potential supply shortfalls in the months ahead. Benchmark copper on the London Metal Exchange bounced 3.6 per cent to US$4,797.50 a tonne. Aluminium edged up 0.4 per cent, nickel 2.6 per cent, lead 1.5 per cent, zinc 1 per cent and tin 1 per cent.
The dollar continued its remarkable recovery. After trading just above 55 US cents last week, the Aussie advanced 1.8 per cent this morning to 59.33 US cents.