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The share market will pick itself up off a four-month low after news of an oral treatment for Covid-19 helped fuel a strong start to October on Wall Street.
ASX futures rallied 52 points or 0.73 per cent to 7180, signalling a positive beginning to a holiday-affected week.
The S&P/ASX 200 dived 147 points or 2 per cent on Friday to its lowest close since early June. The index has fallen for four straight weeks, its longest losing run of the year.
Trading volumes are likely to be impacted by holidays today in NSW, Queensland, South Australia and the ACT.
Wall Street
US stocks launched a new quarter with solid gains as cyclical stocks responded to broadly positive economic data and a potential breakthrough in the treatment of coronavirus.
The S&P 500 rallied 50 points or 1.15 per cent. The Dow Jones Industrial Average surged 483 points or 1.43 per cent. The Nasdaq Composite broke a five-session loss streak with a rise of 118 points or 0.82 per cent.
“Reopening stocks” climbed after Dow component company Merck reported it had developed a drug that reduces the risk of hospitalisation and death from Covid by around 50 per cent. The company intends to seek emergency authorisation from the US regulator for the experimental oral treatment developed with Ridgeback Biotherapeutics.
The S&P 1500 airlines index gained 6.22 per cent. Hyatt Hotels added 6.15 per cent, casino group Las Vegas Sands 4.32 per cent, cruise line Carnival 4.32 per cent and theme park operator Walt Disney 4.04 per cent.
Shares in Merck jumped 8.37 per cent. Vaccine-makers declined. Moderna slumped 11.37 per cent, Johnson & Johnson 0.64 per cent and Pfizer 0.19 per cent.
Also helping sentiment were upbeat signals about the economy. Consumer spending rebounded 0.8 per cent in August, ahead of expectations. Consumer sentiment improved for the first time in three months, according to the University of Michigan. Inflation as measured by personal consumption increased at the same rate as the previous month.
The rally gathered pace after President Joe Biden went to Capitol Hill to try to break a stalemate over the White House’s infrastructure spending bill. Congress passed a stop-gap bill last week to avert a government shutdown, but has been unable to reach terms on legislation on infrastructure and the debt ceiling.
Despite Friday’s rebound, the S&P 500 and Nasdaq posted their largest weekly declines since February. The S&P 500 lost around 2.2 per cent, the Nasdaq 3.2 per cent and the Dow 1.4 per cent.
Australian outlook
Investors will hope a new week brings a circuit-breaker from the downtrend that defined September. The ASX 200 fell 2.7 per cent last month and on Friday finished 5.5 per cent from its August peak.
Volatility has been the defining feature of recent trade. Last week saw the biggest rally of the year (Thursday) and three sessions where the index fell more than 100 points (Tuesday, Wednesday and Friday).
Today’s Labour Day/Queen’s Birthday holidays in NSW, Queensland, South Australia and the ACT will impact trading volumes. Activity across the wider Asia-Pacific region will be affected until Friday by the closure of China’s markets for the annual Golden Week holiday.
US sector action offers plenty of prospects for the day ahead. Energy led with a rise of 3.3 per cent. Also strong were materials +1.6 per cent, financials +1.59 per cent and technology +1.44 per cent. Bond proxies such as utilities and health finished near flat.
The Reserve Bank meets tomorrow, but is not expected to spring any surprises. The central bank has communicated a broad timeline for reducing support for the economy. Rates will remain at a record-low.
Also tomorrow: retail sales, trade data and job advertising. Thursday brings a gauge of services sector activity. Friday has the release of the RBA’s twice-yearly Financial Stability Review.
In the US, all eyes are on Washington as the debt ceiling nears its limit and an infrastructure bill remains bogged down in the House of Representatives. This week’s other focus is likely to be bond markets. A three-month high in yields contributed to last month’s weakness. Friday brings the monthly jobs report, a key measure of the strength of the recovery.
Oil will be in the spotlight ahead of an OPEC meeting tonight. Crude hit a three-year high last week, supported by falling US inventories in the wake of hurricane damage to Gulf Coast facilities.
IPOs: last week’s deluge of new listings slows to a trickle. At this stage, just three companies are lined up to debut this week: Alvo Minerals and NickelSearch (Wednesday); and E79 Gold Mines (Thursday). Note that proposed listings are frequently subject to delays or cancellation.
AGMs: meetings this week include PointsBet, Mirrabooka Investments and Australian Foundation Investment Company (Tuesday); Meridian Energy (Wednesday); and AMCIL and Djerriwarrh Investments (Thursday).
The dollar bounced 0.82 per cent this morning to 72.59 US cents.
Commodities
Oil rallied ahead of tonight’s meeting of the OPEC cartel and allies. Brent crude settled 97 US cents or 1.2 per cent higher at US$79.28 a barrel. The US benchmark, West Texas Intermediate, climbed 1.1 per cent to its strongest finish since October 2018.
“While OPEC+ may decide to increase quotas, some members are unable to meet their individual quotas,” Marshall Steeves, analyst at IHS Markit, told MarketWatch. “Ministers may decide to leave quotas unchanged so as to support current price levels.”
Iron ore trimmed a winning week heading into Golden Week holidays in China. The spot price for ore landed in China eased US$1.25 or 1.1 per cent to US$117 a tonne. Ore prices improved US$6.85 or 6.2 per cent across the week.
BHP and Rio Tinto steadied in US trade following losses in UK action. BHP’s US-listed stock inched up 0.06 per cent after its UK-listed stock sank 2.36 per cent. Rio Tinto dipped 0.01 per cent in the US and 2.15 per cent in the UK.
Copper climbed back above US$9,000 a tonne as a retreat in the greenback made industrial metals less expensive for holders of other currencies. Benchmark copper on the London Metal Exchange firmed 2.1 per cent to US$9,135 a tonne. Nickel improved 0.1 per cent and lead 2.9 per cent. Aluminium and zinc lost 0.2 per cent, and tin 0.6 per cent.
Gold inched higher as the US dollar and bond yields weakened. Metal for December delivery settled US$1.40 or 0.1 per cent ahead at US$1,758.40 an ounce. The NYSE Arca Gold Bugs Index eased 0.52 per cent.
