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Wall Street rebounded with crude oil overnight, setting up Australian shares for their first positive start of the week.

ASX SPI200 index futures rallied 49 points or almost 1 per cent to 5286 as US stocks broke a two-session freefall. Oil rebounded from a dramatic sell-off that triggered sharp selling on share markets around the world amid fears of contagion into other markets.

All 11 S&P 500 sectors advanced as the benchmark index rallied 63 points or 2.29 per cent. The index had given up more than 4 per cent since the start of the week after US crude recorded a negative price for the first time in history. Buyers returned overnight as the price of oil snapped back, corporate earnings came in mostly stronger than expected and a bill to help small businesses made progress in Congress.

The Dow bounced 457 points or 1.99 per cent, regaining a little less than half of its losses for the week. The Nasdaq surged 232 points or 2.81 per cent.

While extreme volatility persisted in oil markets, traders were encouraged by positive closes in US and international crude. West Texas Intermediate for June delivery settled $2.21 or 19.1 per cent higher at US$13.78 a barrel after trading as low as $10.26 and as high as $16.20. The international benchmark, Brent crude, settled $1.04 or 5.38 per cent ahead at US$20.37 a barrel after trading below $16.

Short-sellers scrambled to cover after US President Donald Trump said he had instructed the US Navy to destroy Iranian gunboats if they “harass our ships at sea”. Prices came off their session highs after data showed US stockpiles increased by 15 million barrels last week, compounding storage problems as production outstrips demand. The energy sector climbed 3.6 per cent, with Halliburton putting on 10.3 per cent, Chevron 3.4 per cent and Exxon Mobil 2.9 per cent.

“The short term story in the market remains oil. Yet, this is much bigger than oil,” Gregory Faranello, head of US rates trading at AmeriVet Securities, told CNBC. “The price action over the last 48 hours not only points us back to the economy and demand side, but is showing signs of spill-over and contagion in risk toward other markets.”

A mixed bag of earnings included well-received reports from Snapchat parent company Snap, Texas Instruments and Chipotle Mexican Grill. Netflix eased 2.9 per cent despite reporting record growth in subscribers. Delta Airlines slipped 2.7 per cents as it reported its first quarterly loss in five years. Earnings across the S&P 500 this quarterly reporting season are expected to be almost 14 per cent lower than the same period last year.

The Senate passed a US$484 billion relief package for small businesses and hospitals. The bill now moves to the House of Representatives and is expected to be approved tonight.

Resource stocks benefitted from the recovery in oil. BHP’s US-listed stock gained 2.5 per cent and its UK-listed stock 3.05 per cent. Rio Tinto added 3.72 per cent in the US and 3.69 per cent in the UK. The spot price for iron ore landed in China edged up 60 cents or 0.7 per cent to US$84.20 a dry ton.

President Trump’s sabre-rattling helped precious metals. Gold is seen as a safe store of wealth in times of conflict and settled $50.50 or 3 per cent ahead at US$1,738.30 an ounce. Sentiment was also helped by a bullish outlook from Bank of America, which raised its 18-month target to US$3,000, citing inflationary moves by central banks to cushion economies from COVID-19 lockdowns.

Copper continued to recover from last month’s four-year low as major producers Antofagasta and Teck Resources warned of drops in production. Benchmark copper on the London Metal Exchange rose 2.2 per cent to US$5,109.25 a tonne. Aluminium added 1.8 per cent, lead 0.1 per cent and tin 0.9 per cent. Nickel shed 1.5 per cent and zinc 1 per cent.

The dollar climbed 0.65 per cent to 63.21 US cents.

The S&P/ASX 200 fell almost five per cent in two sessions at the start of the week before mounting a fightback yesterday. The local benchmark briefly extended its weekly loss to 7 per cent before reversing a 120-point decline to finish dead flat.

Preliminary manufacturing and services data for this month due at 9 am EST today are expected to underlined the economic impact of the coronavirus pandemic. Similar reports are scheduled in Europe and the US tonight. Also due in the US are earnings updates from Intel, Blackstone Group, Union Pacific and Domino’s Pizza.

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