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A Federal Reserve pledge to support the US economy until the pandemic threat passes helped Wall Street extend overnight gains, setting up the ASX for a positive start to trade.
Australian index futures climbed 54 points or 0.9 per cent as US stocks closed firmly higher.
The S&P 500 put on 40 points or 1.24 per cent after the Fed left its overnight borrowing rate at a record low and reiterated its willingness to use its “full range of tools” to support the recovery effort. The Dow gained 160 points or 0.61 per cent. The Nasdaq rose 141 points or 1.35 per cent as the tech leaders advanced ahead of reporting earnings.
The Federal Open Market Committee voted unanimously to leave the target range for short-term interest rates at a record low 0 – 0.25 per cent, where it has been since March, and linked the rates outlook to the path of the COVID-19 pandemic.
“The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals,” the Fed said in a statement at the end of a two-day policy meeting. “Following sharp declines, economic activity and employment have picked up somewhat in recent months but remain well below their levels at the beginning of the year.”
Fed Chair Jerome Powell warned the country had entered a dangerous new phase in containing the virus. “We have seen some signs in recent weeks that the increase in virus cases and the renewed measures to control it are starting to weigh on economic activity,” he said. Hopes for a second government stimulus package to replace emergency measures expiring tomorrow were dampened after White House Chief of Staff Mark Meadows this morning told reporters negotiations with Democrats were “nowhere close to a deal”.
The promise of record low interest rates for as long as it takes helped gold add to its ninth straight advance. Gold for August delivery settled $8.80 or 0.5 per cent ahead at US$1,953.40 an ounce ahead of the Fed statement, then rose another $10.50 to US$1,963.90.
Stocks added to earlier gains as Big Tech mounted a pre-earnings rebound. The three-week US reporting season has one of its biggest nights tonight with reports due from four of the five FAANG tech leaders. Apple, Amazon, Alphabet and Facebook each gained between 1.1 and 1.9 per cent overnight as their CEOS appeared before Congress.
The Dow was held back by a poorly-received quarterly from Boeing. The planemaker’s shares dived 2.8 per cent after it reported a much larger loss than analysts expected. Industrial conglomerate General Electric slumped 4.4 per cent as its loss also exceeded expectations. Starbucks rallied 3.7 per cent after raising its forecast, raising hopes that the worst of America’s earnings slump is over.
The S&P/ASX 200 yesterday faded to its lowest close in a week after Queensland announced new border restrictions, sharpening concerns about a second wave of COVID-19 infections in the eastern states. The benchmark index dipped 14 points or 0.2 per cent to a second straight loss, ending three weeks of daily reversals from gains to losses.
The big miners were a drag here yesterday but should provide a tailwind after reversing in overseas action. BHP’s US-listed stock put on 1.38 per cent after its UK-listed stock shed 0.28 per cent. Rio Tinto firmed 2.28 per cent in the US and 0.69 per cent in the UK. The spot price for iron ore landed in China climbed $2.85 or 2.6 per cent to US$110.90 a dry ton.
Oil was boosted by the biggest weekly decline in US crude stockpiles this year. The US Energy Information Administration reported a 10.6 million barrels drop in US inventories last week, the highest since December. Brent crude settled 53 cents or 1.2 per cent higher at US$43.75 a barrel.
Zinc, nickel and lead advanced on the London Metal Exchange ahead of the Fed policy statement. Zinc put on 2.2 per cent, nickel 1.6 per cent and lead 0.2 per cent. Copper eased 0.1 per cent and tin 0.5 per cent. Aluminium was unchanged.
The dollar rose to 71.86 US cents this morning as the greenback was pressured by the Fed’s downbeat assessment of the economic outlook.
