The new trading week looks set for a flat start despite a strong finish on Wall Street amid hopes for a treatment for Covid-19 and a swift return to normal economic life.
The S&P/ASX 200 anticipated Wall Street’s end-of-week rally, climbing 71 points or 1.3 per cent on Friday as US futures surged on news of a possible breakthrough in treating the condition that has paralysed economic activity in huge swathes of the world. Australian index futures edged up one point or less than 0.1 per cent to 5464 on Saturday morning.
Investors betting that the worst has passed helped lift the S&P 500 75 points or 2.68 per cent. The benchmark US index put on 3 per cent last week despite wobbling earlier in the week as soft bank earnings underlined the impact of virus lockdowns.
The Dow rallied 705 points or 2.99 per cent on Friday to carve out a weekly tally of 2.2 per cent. The Nasdaq gained 118 points or 1.38 per cent and outperformed the other indices over the week with a surge of 6.1 per cent as stocks like Amazon and Netflix benefitted from people being confined to homes.
Market sentiment was boosted on Friday by a report that patients with Covid-19 had responded well to Gilead Sciences’ remdesivir drug in a trial in Chicago. Gilead is trialling the drug in dozens of other locations and is due to reports results from a study at the end of this month. Many other companies are working on a vaccine to prevent people contracting the infection.
“An effective treatment is a huge deal and would create a path to open the economy and resume normal ‘social activities’ way sooner than a vaccine,” Tom Lee, head of research at Fundstrat Global Advisors in the US, told CNBC. “A treatment is safer and more scalable because it is only given to people who need to be treated.”
US President Donald Trump released guidelines for state governments to lift restrictions on business activity and social. The guidelines identify conditions states need to satisfy before easing lockdowns. Trump also amped up the pressure on state governors by calling on his supporters to “liberate” states controlled by the Democratic Party. New York State Governor Andrew Cuomo this morning said hospitalisations were decreasing and all indications were that the state was past the infection peak.
Traders rotated out of “stay-at-home” plays into stocks exposed to an economic recovery. On the Dow, planemaker Boeing surged 14.7 per cent, Exxon Mobil 10.4 per cent and Chevron 9 per cent. Netflix eased 3.7 per cent and Amazon 1.4 per cent. Gilead shares climbed 9.7 per cent.
BHP’s US-listed stock improved 3.65 per cent and its UK-listed stock 4.02per cent. Rio Tinto added 2.52 per cent in the US and 3.32 per cent in the UK. The spot price for iron ore landed in China climbed 95 cents or 1.1 per cent to US$85.45 a dry ton.
The US energy sector surged 10.4 per cent even as US crude settled at its lowest level in 18 years. West Texas Intermediate finished $1.60 or 8.1 per cent lower at US$18.27 a barrel after trading as low as US$17.37. The global benchmark, Brent crude, fared better, settling 26 cents or 0.9 per cent ahead at US$28.08 a barrel. Some of the disparity was explained by the belief that other parts of the world are several weeks ahead of the US in lifting lockdown restrictions.
Gold tends to rise with pessimism over the economic outlook and decline when the future brightens. Gold for June delivery settled $32.90 or 1.9 per cent lower at US$1,732.80 an ounce on Friday and shed around 3 per cent over the week.
Copper, heavily dependent on Chinese demand, finished its best week in more than a year at a one-month high after Chinese factory production fell less than expected last month. Benchmark copper on the London Metal Exchange rose 1.5 per cent on Friday to US$5,194 a tonne for a weekly tally of around 4 per cent. Aluminium eased 0.4 per cent and lead 1.2 per cent. Nickel gained 2.4 per cent, zinc 1.1 per cent and tin 0.6 per cent.
The dollar eased less than 0.1 per cent this morning to 63.6 US cents.
The S&P/ASX 200 put on 1.86 per cent last week, ending at its highest level in more than a month. The week ahead is light on economic data, but heavy on quarterly corporate profit reports. Big-hitters reporting this week include IBM, Intel, AmEx, Coca-Cola, Netflix and several airlines. Tonight’s schedule includes United Airlines and Halliburton.