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“Reopening stocks” led a recovery in the US overnight, setting up the ASX for a positive open following two days of losses.
ASX futures bounced 37 points or 0.53 per cent as the Dow and S&P 500 gained around 0.9 per cent and the Nasdaq almost 1.2 per cent.
Iron ore backed off its strongest level in a decade. Gold rose to a two-month high. Copper and the dollar rallied. Oil retreated.
Wall Street
Bargain-hunters scooped up companies hit hardest by two days of worry over a global spike in Covid cases. Airlines and cruise companies were among the best performers as the S&P 500 rallied 38 points or 0.93 per cent.
The Dow Jones Industrial Average climbed 316 points or 0.93 per cent. The Nasdaq Composite rose 164 points or 1.19 per cent. The Russell 2000 index of small caps – seen by some investors as a barometer of risk appetite – jumped 2.35 per cent.
Companies best placed to benefit from an economic recovery led the rally. Norwegian Cruise Line Holdings surged 10.32 per cent after Goldman Sachs upgraded its rating to buy from neutral. Competitors Carnival and Royal Caribbean bounced 6.26 and 4.47 per cent, respectively.
United Airlines reversed 3.1 per cent of Tuesday’s 8.5 per cent post-earnings dive. Hotel groups Hyatt and Marriott both gained at least 1.9 per cent.
Netflix slumped 7.4 per cent after reporting subscriber gains well short of analysts’ expectations. The company also walked back expectations for growth this quarter as the Covid subscriber bump fades.
The spread of Covid across India and Japan pushed traders towards pandemic-proof Big Tech. Apple, Amazon. Microsoft and Tesla all rose.
“Investors feel more confident of the earnings growth prospects for technology,” Sam Stovall, chief investment strategist at CFRA Research, told Reuters. “They would rather gravitate toward the sure thing, which right now is tech stocks.”
Australian outlook
The S&P/ASX 200 appears to have a green light to resume its upwards trend following a two-day setback. Anyone who bought yesterday’s dip should be well placed for further gains today. The index briefly plunged 110 points yesterday before traders snapped up the likes of BHP and CSL, cutting the index’s loss to a slim 20 points.
The materials sector led the US advance, rising 1.87 per cent as a decline in the greenback helped US dollar-denominated commodity prices. Energy stocks rose 1.48 per cent, financials 1.39 per cent and industrials 1.36 per cent. Defensive utilities slid 0.9 per cent. Communication services slipped 0.28 per cent, thanks to Netflix’s prang.
An issue to watch in the days ahead is Chinese retaliation against the federal government’s decision to tear up Victoria’s “Belt and Road” deal. An aggressive article in the Communist Party-run Global Times this morning branded the decision an “unreasonable provocation” and warned of “serious consequences”.
“Australian officials are fully aware of the consequences of the move, but they went ahead with it… that clearly shows Australia’s intention to further escalate tensions with China rather than deescalate,” Chen Hong, a professor and director of the Australian Studies Center at the East China Normal University, told the state-run newspaper.
Quarterly business confidence figures are due today at 11.30 am AEST. Property group Dexus holds its AGM. Australian Pharmaceuticals Industries is due to release half-year earnings. A slew of quarterlies are scheduled from the likes of Santos, Galaxy Resources and Evolution Mining, according to Morningstar.
The rise in risk appetite lifted the dollar 0.41 per cent to 77.54 US cents.
Commodities
Iron ore backed off its highest level in a decade. The spot price for ore landed in China eased $2 or 1.1 per cent to US$185.75 a tonne. BHP’s US-listed stock rebounded 2.04 per cent and its UK-listed stock 0.53 per cent following yesterday’s quarterly update. Rio Tinto put on 1.51 per cent in the US and 0.32 per cent in the UK.
Oil slipped to its weakest level in a week as the spread of Covid through Asia dimmed the demand outlook. Brent crude settled $1.25 or 1.9 per cent lower at US$65.32 a barrel.
Hedging over the resurgence of Covid helped gold to its highest level in around two months. Gold for June delivery settled $14.70 or 0.8 per cent ahead at US$1, an ounce. The NYSE Arca Gold Bugs Index rose 2.21 per cent.
“A growing sense of unease over the surging COVID-19 cases in Asia has hit risk sentiment and left investors on edge,” Lukman Otunuga, senior research analyst at FXTM, told MarketWatch. “With concerns likely to rise over how this may impact the world’s economic rebound from COVID-19, gold has the potential to push higher as risk-off makes a return.”
US-traded copper logged its highest close since February’s near-decade high. May copper rose 1.6 per cent to US$4.28 a pound.
