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Share futures pointed cautiously higher as investors weighed solid gains on Wall Street against fears of a second coronavirus wave.
ASX SPI200 index futures edged up a tepid 31 points or 0.5 per cent despite strong leads. The Nasdaq Composite hit a new record, Asian markets soared, and oil and metals rallied.
The S&P/ASX 200 fell 43 points or 0.7 per cent yesterday after the NSW and Victorian governments announced they will close their border tonight. The decision came as Victoria recorded its biggest single-day increase in cases since the start of the pandemic and two Victorian men died, bringing the national death toll to 104.
Australia was the only major share market to retreat during 24 hours of ‘risk-on’ trade around the world. China’s Shanghai Composite soared 5.71 per cent, Hong Kong’s Hang Seng 3.81 per cent and Europe’s Stoxx 600 1.58 per cent.
The Nasdaq in the US rose 226 points or 2.21 per cent to an all-time closing high. The S&P 500 put on 50 points or 1.59 per cent. The Dow added 460 points or 1.78 per cent.
Tech stocks spearheaded the US advance. All five members of the ‘FAANG’ leadership group gained at least 2 per cent. Facebook put on 2.9 per cent, Amazon 5.8 per cent, Apple 2.7 per cent, Netflix 3.6 per cent and Google parent company Alphabet 2 per cent. Amazon, Netflix and Tesla hit record highs.
Investors were encouraged by a round of deal-making, a possible sign that stock prices still present reasonable value. Warren Buffett’s notoriously cautious Berkshire Hathaway swooped on the natural gas transmission and storage assets of Dominion Energy in a deal worth around US$10 billion, including debt. Uber snapped up food-delivery app Postmates for around US$2.65 billion.
Asian markets built a platform for European and US gains with yesterday’s huge rally. The Shanghai Composite claimed its strongest level since 2018 after a front-page editorial in a state-owned newspaper talked up the prospects of a “healthy bull market”. Retail investors took the hint. Recent economic data suggested the Chinese economy is powering back out of the pandemic lockdown.
Economic data in the US also surprised to the upside. A measure of activity in the services sector surged to 57.1 last month from 45.4 in May, the biggest rise since the survey was created in 1997. Economists had expected a more modest expansion to a reading of around 51.
“The economy is doing a lot better than most of the economists think,” Jeff Saut, chief investment strategist at Capital Wealth Planning in the US, told CNBC. “We may stall here for a while into the fall, into September, October, November, but I think you’re going to get a rocket ship coming in the fall of this year… I think the S&P 500 is going to trade above 4,000.”
Resource stocks helped drag the ASX lower yesterday, but should provide support today following gains in iron ore, oil and base metals. BHP’s US-listed stock climbed 0.72 per cent and its UK-listed stock 1.76 per cent. Rio Tinto gained 1.17 per cent in the US and 2.05 per cent in the UK. The spot price for iron ore landed in China improved 40 cents or 0.4 per cent to US$101.60 a dry ton.
Copper, sometimes dubbed “Dr Copper” or the “metal with the degree in economics”, hit a five-month peak on optimism over Chinese demand. Benchmark copper on the London Metal Exchange climbed 1.9 per cent to US$6,135.25 a tonne. Aluminium gained 1.2 per cent, nickel 2.6 per cent, lead 1 per cent, zinc 1.8 per cent and tin 1 per cent.
The international oil benchmark was boosted by a Saudi Arabian price increase. Brent crude settled 30 cents or 0.7 per cent ahead at US$43.10 a barrel after the Saudis lifted the price of a barrel for Asian customers for a third month. The US benchmark eased two cents or less than 0.1 per cent to US$40.63 amid demand pressure from the spread of COVID-19.
Gold reached its highest level in a week as the US dollar softened. Gold for August delivery settled $3.50 or 0.2 per cent ahead at US$1,793.50 an ounce.
A ‘risk-on’ session on forex markets lifted commodity currencies. The Aussie advanced 0.52 per cent to 69.73 US cents.
The Reserve Bank meets today, but is not expected to announce any major policy changes when it updates its rates outlook at 2.30 pm EST.
