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Tentative rebounds on financial and commodity markets point to a rare positive start to Australian trade following weeks of turmoil.
ASX SPI200 index futures bounced 119 points or 2.5 per cent after concerted action by central banks helped US and European stocks edge higher. Oil reversed its third-heaviest loss of all time in the US with its biggest rise on record. Copper and gold steadied.
Wall Street clawed back a fraction of this week’s dramatic losses as central banks in the US and Europe announced fresh emergency measures to support their economies as the Covid-19 pandemic threatens to plunge the world into a global recession. The S&P 500 rose 11 points or 0.47 per cent, reversing a fraction of Wednesday’s 131-point plunge. The Dow finished 188 points or 0.95 per cent ahead after earlier falling as much as 721 points or more than 3 per cent. The Nasdaq outperformed with a surge of 160 points or 2.3 per cent as tech stocks led the rebound.
The market mood settled somewhat as policymakers scrambled to douse spot-fires in different sections of the financial system. After slashing interest rates to zero and injecting billions into the system, the US Federal Reserve opened currency swap lines with nine countries, including Australia, to keep dollars flowing to banks around the world. The agreement mirrors action taken during the financial crisis intended to alleviate potential shortages.
Also helping sentiment were signs Congress was close to passing an emergency stimulus bill to help US workers and businesses. As President Donald Trump signed into law a US$100 billion aid package offering paid leave and free testing, the Senate passed a bill offering benefits and extended leave.
The energy sector led the rally, rebounding 6.8 per cent after an extraordinary bounce in crude oil following reports the White House was considering intervening in a damaging price war between Saudi Arabia and Russia. A day after falling $6.58 or more than 24 per cent to a 20-year low, West Texas Intermediate crude surged $4.85 or 23.8 per cent to settle at US25.22 a barrel. The gain was the largest on records going back to 1983. The global benchmark, Brent crude, settled $3.59 or 14.4 per cent higher at US$28.47 a barrel, reversing almost all of Wednesday’s $3.85 dive.
A “risk-on” session saw financials, materials and consumer discretionary sectors all rise at least 2.2 per cent, while defensive utilities, health and consumer staples each shed more than 1.8 per cent.
European stocks rallied after the European Central Bank announced a US$820 billion pandemic emergency response package. The pan-European Stoxx 600 rose 2.91 per cent as markets in German, Italy and France each gained more than 2 per cent.
The ASX 200 ended another torrid session yesterday at a new four-year low after falling 170 points or 3.4 per cent. The benchmark Australian index has fallen 33.5 per cent from its February high in less than four weeks. Yesterday’s fall came as the dollar briefly traded as low as 55.08 US cents, a level last seen in 2002, after the Reserve Bank cut the cash rate to a record low 0.25 per cent. The Aussie was this morning trading at 57.6 US cents after bouncing as high as 59.5 US cents overnight.
A mixed night for the big Australian miners saw BHP rise and Rio Tinto retreat in overseas action. BHP’s US-listed stock climbed 4.52 per cent and its UK-listed stock 0.26 per cent. Rio Tinto shed 0.18 per cent in the US and 2.8 per cent in the UK. The spot price for iron ore landed in China dipped 25 cents or 0.3 per cent to US$90.50 a dry ton.
Gold steadied near a three-month low. Gold for April delivery settled $1.40 or 0.1 per cent ahead at US$1,479.30 an ounce.
Copper rallied for the first time in four sessions amid reports of cautious bargain hunting. Benchmark copper on the London Metal Exchange advanced 2 per cent to US$4,835 a tonne. Aluminium slid 1.2 per cent, nickel 1.3 per cent and lead 3 per cent. Zinc was flat. Tin gained 2.4 per cent.
