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A late bank-driven rebound on Wall Street points to relief for Australian investors following the local market’s worst session in two weeks.

ASX SPI200 index futures rallied 70 points or 1.2 per cent, signalling an opening bounce. The S&P/ASX 200 plunged 148 points or 2.5 per cent yesterday after an up-tick in coronavirus cases in Victoria added to concerns that a second wave sweeping the globe will dampen attempts to revive the economy. The tumble was the index’s heaviest since a 189-point rout on June 11.

Wall Street wobbled between losses and gains before breaking higher in the final hour after regulators eased restrictions on banks to free up working capital. The S&P 500 rose 33 points or 1.1 per cent. The Dow rebounded 300 points or 1.18 per cent. The Nasdaq Composite put on 108 points or 1.09 per cent.

The S&P 500 banks index surged 3.6 per cent after the Federal Deposit Insurance Commission said they would loosen the so-called “Volcker Rule” introduced after the 2008 recession to prevent another financial crisis. The change will effectively make it easier for banks to make riskier investments with customers’ money. Another change means banks will no longer have to set aside cash for derivatives trades between different wings of their operations, freeing up more capital.    

“When we think about a recession of the magnitude that we have, there’s going to be some credit write-offs by banks,” Art Hogan, chief market strategist at National Securities in the US, told CNBC. “The fact that they’re going to have more working capital makes markets breathe a sigh of relief.”

The changes reflect a White House push to wind back regulations introduced by the Obama administration. Banks have lobbied hard for a lighter touch from regulators. Wells Fargo shares jumped 4.8 per cent, Goldman Sachs 4.6 per cent, Bank of America 3.8 per cent and JPMorgan Chase 3.5 per cent.

Earlier, stocks struggled for traction as investors weighed glum jobs data and a rise in coronavirus infections. First-time claims for jobless benefits were higher than expected for a second week. Last week saw 1.48 more Americans file for benefits, topping the 1.35 million expected by economists surveyed by Dow Jones. The number of continuing claims declined by 767,000 to below 20 million for the first time in 14 weeks. A separate report showed orders for durable goods rebounded 15.8 per cent in May.

Meanwhile, the US recorded its biggest daily increase in COVID-19 cases since the start of the pandemic. More than 45,000 new cases were recorded on Wednesday. Arizona and Texas announced they would pause plans to reopen their economies. Apple said it would close more stores in hot spots. Disney will delay reopening theme parks.

Energy was the second-best performing sector after financials, rising 1.9 per cent after a bounce in oil. Brent crude settled 74 cents or 1.8 per cent ahead at US$41.05 a barrel.

The materials sector also fared well, gaining 1.3 per cent as copper and other metals rallied. BHP’s US-listed stock put on 2.07 per cent and its UK-listed stock 1.13 per cent. Rio Tinto added 2.03 per cent in the US and 0.79 per cent in the UK. The spot price for iron ore landed in China held steady at US$104.60 a dry ton.

The possibility of virus-driven mine shutdowns and supply issues kept copper well bid. Benchmark copper on the London Metal Exchange rose 0.5 per cent to US$5,883.50 a tonne. Lead gained 1.4 per cent and zinc 0.6 per cent.  Aluminium shed 0.4 per cent, nickel 0.8 per cent and tin 0.4 per cent.

Gold retreated for a second session amid strength in the US dollar and a move into risk assets. Gold for August delivery settled $4.50 or 0.3 per cent lower at US$1,770.60 an ounce.

The dollar bounced 0.2 per cent to 68.85 US cents.

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