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A rebound on Wall Street points to a cautiously positive start to Australian trade following two days of heavy falls.

ASX SPI200 index futures bounced 24 points or 0.4 per cent as US stocks pared their worst weekly losses since March.  

The Australian market erased more than a week of gains in two brutal sessions at the end of last week amid speculation that optimism over reopening the economy had lifted financial markets beyond fair value. The S&P/ASX 200 shed 301 points or 4.9 per cent to finish 2.5 per cent lower for the week.

A nervy US session on Friday saw stocks rally in the final two hours of trade. The S&P 500 gained 39 points or 1.21 per cent ahead to reduce its loss for the week to 4.8 per cent. The Dow bounced 477 points or 1.9 per cent. The blue-chip average lost a hefty 5.6 per cent last week as traders rotated out of recovery plays into big tech stocks. The Nasdaq added 114 points or 1.02 per cent and outperformed over the course of the week with a loss of 2.3 per cent.

The session was defined by significant swings following heavy falls on Thursday when the S&P 500 gave up 5.89 per cent. The major indices opened near their highs for the day, turned negative shortly after lunch and needed recoveries over the final two hours of trade to secure wins. The S&P 500 swung between a high of 3 per cent and a low of -0.6 per cent. At its peak, the Dow was up more than 800 points. Wall Street’s “fear gauge”, the VIX, briefly hit its highest level since April before fading.

The 12-week global share market rally stuttered last week as the US struggled to control an upsurge in COVID-19 infections and the Federal Reserve warned the road to recovery will be long and hard. A Fed prediction that US interest rates will remain near zero two and a half years from now doused expectations of a V-shaped recovery. On Friday, the International Monetary Fund said the global economic recovery was taking longer than expected and the fund would revise downwards its growth forecasts.

“We had gone straight up more than 30 per cent without a real sell-off, so you’re due for one, and I don’t think it’s the worst thing in the world,” JJ Kinahan, chief market strategist at TD Ameritrade in the US, told CNBC. “Some of these stocks may have gotten ahead of their skis. When you see some of the airlines being priced at the levels they were before this all started when they say they’re going to do 60 per cent of their business just doesn’t make sense.”

Airline stocks rebounded on Friday following a two-day sell-off. United bounced 19 per cent, Delta 11.9 per cent and Southwest 9.3 per cent. Norwegian Cruise Line Holdings surged 18.8 per cent and Carnival 14.6 per cent.

Real estate, financials and energy were the best-performing sectors, all rising at least 2.7 per cent. The defensive utilities and consumer staples sectors finished lower.

Australia’s mining giants benefitted from a 1.9 bounce in the materials sector. BHP’s US-listed stock rose 2.75 per cent and its UK-listed stock 1.1 per cent. Rio Tinto gained 3.51 per cent in the US and 2.25 per cent in the UK. The spot price for iron ore landed in China improved $1.40 or 1.3 per cent to US$105.35 a dry ton.

Oil ended its first losing week in seven with a skinny rebound. Brent crude settled 18 cents or 0.5 per cent higher at US$38.73 a barrel to reduced its loss for the week to 8.4 per cent.

A strong week for gold finished with a modest loss on Friday. Gold for August delivery settled $2.50 or 0.1 per cent lower at US$1,737.30 an ounce. The precious metal gained 3.2 per cent during a volatile week as a grim outlook from the Fed weighed on the greenback.

Copper also recorded a gain for the week, rising 0.3 per cent on the London Metal Exchange to US$5,761.50 a tonne and a final five-day tally of 1.7 per cent. Nickel put on 0.1 per cent on Friday, lead 1.1 per cent and tin 1.5 per cent. Aluminium dipped 1 per cent and zinc 1.5 per cent.

The dollar started the week on the back foot, falling 0.32 per cent to 68.4 US cents.

The day ahead brings a round of May Chinese economic data at noon EST. Australian data starts to flow tomorrow with the minutes from the June RBA meeting and weekly consumer sentiment report. The week’s big domestic release is the May jobs report on Thursday.   

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