The Australian share market is eyeing a cautiously positive start to trade after US stocks climbed sharply on the prospect of the economy re-opening.
ASX SPI200 index futures climbed 10 points or 0.2 per cent to 5500 after the S&P 500 in the US rallied more than 3 per cent. The S&P/ASX 200 preempted the overnight bull run with a rally of 101 points or 1.9 per cent yesterday
A soft start to the US quarterly corporate earnings season was overshadowed by signals state and federal governments are exploring ways to ease lockdown restrictions imposed to arrest the spread of the Covid-19 pandemic. The S&P 500 surged 88 points or 3.06 per cent as Amazon’s all-time high helped offset poorly-received profit updates from Wells Fargo and JPMorgan Chase. The Dow put on 559 points or 2.39 per cent. The Nasdaq added 323 points or 3.95 per cent.
White House economic adviser Larry Kudlow said President Donald Trump would make some “very important announcements” in the next day or two about re-opening the economy. “The country is ready to go back to work,” Kudlow declared. At the same time, Reuters reported that ten states were coordinating regional plans to lift ‘stay-at-home’ orders and allow businesses to re-open.
The move towards easing lockdowns comes amid signs the infection curve may be levelling off in New York, the worst-hit state. The number of people sent to hospital declined for the first time since the start of the pandemic and the number of deaths has been levelling off.
“The market is going up on prospects of the economy re-opening soon and also the coronavirus reaching some sort of peak,” Peter Cardillo, chief market economist at Spartan Capital Securities in the US, told Reuters.
Amazon shares climbed 5.3 per cent to a record a day after the online retail giant announced it was hiring 75,000 new workers to cope with a surge in demand from people stuck at home. Drug-maker Johnson & Johnson put on 5.5 per cent as stronger-than-expected first -quarter profit and sales offset a downbeat outlook for the year. The company said it was racing to develop a vaccine against the coronavirus.
Investors were prepared for grim news from banking giants Wells Fargo and JPMorgan Chase, but were still shocked at the scale of their profit declines. Shares in Wells Fargo sank 4 per cent after the high-street lender reported a profit of just one cent a share, versus analyst expectations of 33 cents per share. The company made $1.20 per share during the same quarter last year. JPMorgan Chase fell 2.7 per cent after America’s largest bank revealed a 69 per cent dive in profits and set aside US$8.2 billion for an expected wave of loan defaults.
The S&P 500 has rebounded 27.5 per cent from its March 23rd low. The local S&P/ASX 200 has bounced 24.7 per cent.
Oil plunged to a two-week low as a relief rally ahead of a new OPEC production deal faded. Brent crude settled $2.14 or 6.7 per cent lower at US$29.60 a barrel. Analysts said the OPEC deal to cut production by 10 per cent would make little impact when global demand had collapsed by up to 30 per cent.
Gold rallied for a fourth session as the grim corporate news weighed on the greenback. Gold for June delivery settled $7.50 or 0.4 per cent ahead at US$1,768.90 an ounce, a new seven-year peak.
Mining giants BHP and Rio Tinto overcame weakness in the UK, rising in the US. BHP’s US-listed stock put on 1.89 per cent after its UK-listed stock had eased 0.11 per cent. Rio Tinto edged up 0.25 per cent in the US and fell 0.78 per cent in the UK. The spot price for iron ore landed in China improved 90 cents or 1.1 per cent to US$86.10 a dry ton.
Copper surged to a four-week high amid signs that Chinese demand is picking up. Benchmark copper on the London Metal Exchange advanced 2.6 per cent to US$5,150 a tonne. Aluminium and nickel tacked on 1.8 per cent, zinc 1.1 per cent and tin 3 per cent. Lead eased 1.8 per cent.
The dollar rose 0.9 per cent to 64.4 US cents.
The day ahead brings April consumer sentiment data at 10.30 am EST. Wall Street has retail sales, business inventories and industrial production figures scheduled for tonight. The corporate reporting season continues with updates from Bank of America, Citigroup, Goldman Sachs, UnitedHealth and Atlassian.