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An 800-point U-turn on the Dow points to a bright start to Australian trade despite yesterday’s bleak employment report.
ASX SPI200 index futures rallied 45 points or 0.8 per cent, positioning the index for a crack at paring its losses for the week.
A 93-point tumble yesterday pushed the S&P/ASX 200 62 points or 1.2 per cent into the red for the week. The market unravelled after a report showed more than half a million Australians were thrown out of work last month as the nation locked down against the coronavirus pandemic.
Wall Street shrugged off its own grim job news. Almost three million Americans applied for unemployment benefits for the first time last week, pushing the number who have lost work during the pandemic beyond 36 million. Stocks opened deep in the red, then recovered steadily to close at session highs.
The Dow finished 377 points or 1.62 per cent ahead after being down as much as 458 points in the first hour of trade. The reversal snapped a three-session losing run for the blue-chip average.
The broader S&P 500 rallied 33 points or 1.15 per cent. The Nasdaq brought up the rear with a rise of 81 points or 0.91 per cent.
While there was no specific trigger for the reversal, the major indices looked ripe for bargain-hunters after downbeat outlooks earlier in the week from Federal Reserve Chair Jerome Powell and infectious disease specialist Dr Anthony Fauci sent the market sharply lower. Despite last night’s recoveries, the S&P 500 and Dow both finished 2.6 per cent lower for the week.
Markets are locked in a tug of war between bulls betting on a return to normal economic life as lockdown restrictions are lifted and bears betting on another market downleg as a second wave of COVID-19 infections and the lack of a vaccine undermine the market recovery. Europe’s benchmark, the Stoxx 600, slumped 2.17 per cent overnight.
US Investors struggled with a night of mixed signals. A former health official told Congress the US faced “the darkest winter” if it did not change its response to the pandemic. Meanwhile, a Wisconsin court overturned the state governor’s lockdown orders. The White House has said it is open to further stimulus measures, but this morning formally vetoed a US$3 trillion Democrat stimulus bill.
Bank stocks led the reversal. Wells Fargo gained 6.8 per cent, JPMorgan Chase 4.2 per cent, Bank of America 4 per cent and Citigroup 3.6 per cent. Twenty-six out of thirty Dow components rallied, led by AmEx +7.4 per cent, UnitedHealth Group +4.5 per cent and Cisco Systems +4.5 per cent.
The energy sector put on 0.9 per cent as US oil climbed to its highest level in almost six weeks. West Texas Intermediate crude rose $2.27 or 9 per cent to US$27.56 a barrel a day after data showed US stockpiles shrank last week for the first time in almost four months. Brent crude settled $1.94 or 6.7 per cent ahead at US$31.13 a barrel.
Australia’s largest miners gathered strength as the night went on. BHP’s US-listed stock gained 1.84 per cent after its UK-listed stock added 0.82 per cent. Rio Tinto rose 1.84 per cent in the US and 0.71 per cent in the UK. The spot price for iron ore landed in China eased 40 cents or 0.4 per cent to US$90.75 a dry ton.
The price of gold reached a three-week high as investors continued to hedge against worst-case scenarios as countries around the world lift lockdown restrictions. Gold for June delivery settled $24.50 or 1.4 per cent higher at US$1,740.90 an ounce. Benchmark copper on the London Metal Exchange eased 0.3 per cent to US$5.173.75 a tonne. Aluminium shed 0.3 per cent, nickel 1.5 per cent, zinc 0.7 per cent and tin 0.8 per cent. Lead improved 1.5 per cent.
The dollar edged up 0.1 per cent to 64.61 US cents.
The day ahead brings a Chinese economic round-up for April at noon EST. Wall Street has retail sales and consumer sentiment reports scheduled for tonight.
