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A 900-point U-turn on the Dow points to a soft start to Australian trade.  

SPI200 index futures declined 52 points or 1 per cent to 5190 as a rally on Wall Street evaporated. In a repeat of yesterday’s Australian action, US stocks pushed sharply higher in early trade before rolling over to slim losses as traders weighed signs that the coronavirus may be slowing against the economic havoc wreaked by lockdowns.

The Dow rallied almost a thousand points after health officials said social distancing was working and the pandemic may not kill as many Americans as originally projected. In another night of extreme volatility, the gains leaked away in  series of downward lurches that left the blue-chip average 26 points or 0.12 per cent in the red. The S&P 500 gave up four points or 0.16 per cent and the Nasdaq 26 points or 0.33 per cent.

The reversal mirrored the performance of the S&P/ASX 200 here yesterday. The Australian benchmark rallied as much as 2.6 per cent in early action before closing 35 points or 0.6 per cent in the red.

Some analysts suggested the risk:reward ratio has tilted over the last two weeks, with many global indices sitting more than 20 per cent above last month’s lows in expectation that the worst of the pandemic is passing.   

“Risk to the downside is greater than the opportunity to the upside from this point where we stand today,” David Kostin, chief equity strategist at Goldman Sachs, told CNBC. “In 2008 in the fourth quarter there were many different rallies, I call them bear market rallies, some of which almost 20 per cent a couple of times — but the market did not bottom until March of 2009.”

Overnight, the global death toll from Covid-19 passed 80,000 as the UK and New York recorded their highest ever daily tallies. New York Governor Andrew Cuomo said the death rate was a “lagging indicator”, and claimed other data suggested New York State was at the peak of the outbreak and reaching a plateau. Italy reported its lowest number of new infections in almost three weeks, but deaths in Spain rose for the first time in five days. UK Prime Minister Boris Johnson spent his second night in intensive care.

Investors awaited more details of a planned fourth emergency relief package. Bloomberg reported that the Phase 4 bill will be worth at least US$1 trillion and will send cheques to individuals, and extend unemployment insurance and top up a fund that loans to small businesses. A Republican senator suggested a bill could be put to a vote as soon as tomorrow night.  

Beleaguered cruise companies were boosted by news that Saudi Arabia’s sovereign wealth fund had taken advantage of recent share price weakness by buying an 8.2 per cent stake in Carnival. Carnival’s stock, which had fallen more than 70 per cent during the pandemic, bounced 10.7 per cent. Royal Caribbean put on 13.3 per cent and Norwegian Cruise Line 10 per cent.

The materials and energy sectors outperformed, rising 2.4 and 2 per cent, respectively. The financial sector put on 0.9 per cent. The defensive utilities and consumer staples sectors both lost 1.2 per cent.

The big two Australian miners turned lower in US trade. BHP’s US-listed stock fell 0.98 per cent after its UK-listed stock gained 3.74 per cent. Rio Tinto lost 1.32 per cent in the US after ending flat in the UK. The spot price for iron ore landed in China eased 60 cents or 0.7 per cent to US$81.95 a dry ton.

US energy stocks advanced despite solid falls in the price of crude after the US Energy Administration cut its price outlook but did not reduce its production forecast by as much as some analysts expected. Brent crude settled $1.18 or 3.6 per cent lower at US$31.87 a barrel. The US benchmark, West Texas Intermediate, tumbled $2.45 or 9.4 per cent to US$23.63.

Gold hit its highest level since late 2012 before rolling over to a loss. Gold for June delivery settled $10.20 or 0.6 per cent in the red at US$1,683.70 an ounce after hitting US$1,742.60.

The dollar climbed 1.3 per cent to 61.66 US cents.

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