Aussie shares look primed for an early rebound in light, holiday-affected trade following a measured Wall Street reaction to news of Donald Trump’s coronavirus diagnosis.
Local investors went into the weekend fearing the worst as US futures plunged on Friday’s news. However, ASX SPI200 index futures rebounded 67 points or 1.2 per cent, reversing most of Friday’s 1.4 percent plunge on the S&P/ASX 200, after US stocks finished off their lows in choppy trade.
Mining heavyweights BHP and Rio Tinto rose in overseas action. Oil and gold declined.
US stocks fell as the president’s diagnosis compounded the list of unknowns facing the market ahead of next month’s election. The S&P 500, the broadest of the three major benchmarks, dropped 32 points or 0.96 per cent.
The blue-chips of the Dow Jones Industrial Average shed 134 points or 0.48 per cent, a fraction of the 500-point plunge indicated by futures action heading into the session. The Nasdaq gave up 251 points or 2.22 per cent.
Despite Friday’s setbacks, US stocks marched higher last week. The S&P 500 and Nasdaq added 1.5 per cent. The Dow gained 1.9 per cent.
Stocks finished off their lows after House Democrats promised “imminent” government support for the troubled airline industry. American Airlines and United rebounded 3.3 per cent and 2.4 per cent, respectively.
Pressure for a new coronavirus relief package increased after September jobs data suggested the economic rebound was slowing. The increase of 610,000 new jobs last month was the smallest since the recovery began and fell short of the 800,000 expected by economists polled by Dow Jones.
Today’s session looks set for a positive start, but trading volumes are likely to be impacted by public holidays in NSW, Queensland, South Australia and the ACT. Chinese markets are closed until Thursday, further depressing regional cashflow.
Investors will keep a wary eye on US futures after the White House sought to hose down fears about the president’s health over the weekend. His doctors suggested he could be allowed to return to the White House as soon as tonight after receiving steroids for falling oxygen levels on Friday and Saturday.
Defensive sectors outperformed in the US: real estate and utilities both gained at least 1.1 per cent. However, financials, industrials, energy and materials also resisted the downtrend, rising between 0.7 and 1.1 per cent in a sharply bifurcated market. Tech stocks were smashed 2.6 per cent.
Event risk is higher than normal this week, heading into tomorrow’s RBA/federal budget double-header. The RBA Rate Indicator tool suggests there is a 67 per cent chance the Reserve Bank will cut the cash rate to 0.1 per cent tomorrow afternoon, ahead of what is expected to be a stimulatory budget from the Federal Government tomorrow evening featuring tax cuts and subsidies.
A 0.8 per cent lift in the US materials sector helped iron ore giants BHP and Rio Tinto. BHP’s US-listed stock edged up 0.23 per cent and its UK-listed stock 0.55 per cent. Rio Tinto put on 1.12 per cent in the US and 0.98 per cent in the UK. With Chinese markets closed for a public holiday, the spot price for iron ore landed in China was steady at US$123.15 a dry ton.
US energy stocks climbed 1 per cent despite sharp losses in oil. Brent crude settled $1.66 or 4.1 per cent lower at US$39.27 a barrel. The US benchmark shed 4.3 per cent. For the week, Brent crude gave up 7.4 per cent and West Texas Intermediate around 8 per cent.
The Arca Gold Bugs Index of US gold miners slid 1.4 per cent as gold fell from a two-week peak. Gold for December delivery settled $8.70 or 0.5 per cent in the red at US$1,907.60 an ounce. Silver lost 0.9 per cent.
Copper slumped to a seven-week low before rebounding. Benchmark copper on the London Metal Exchange fell as low as US$6,269 before rising 0.5 per cent to US$6,418.50 a tonne in official rings. Aluminium was flat. Nickel fell 0.3 per cent, lead 1.3 per cent and zinc 0.4 per cent. Tin added 1.3 per cent.
The dollar opened the week 0.05 per cent ahead at 71.67 US cents.