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A tech-led rebound on Wall Street promises relief for local investors after the ASX’s longest losing run since April dragged stocks to three-month lows.
ASX SPI200 index futures bounced 60 points or 1 per cent, giving the market a shot at its first advance in five sessions. The S&P/ASX 200 fell 0.7 per cent yesterday to its weakest close since mid-June.
Overnight, US stocks and oil bounced, European markets stabilised and iron ore and gold declined.
Wall Street
US stocks rose for the first time in five sessions, rebounding from sharp losses on Monday. The S&P 500 advanced 35 points or 1.05 per cent. The Dow gained 140 points or 0.52 per cent. The Nasdaq surged 1.85 points or 1.71 per cent.
So-called ‘stay-at-home’ stocks outperformed as traders positioned for the threat of fresh lockdowns as Europe battles a second wave of infections. US stocks declined in early trade after the UK government announced fresh measures to curb the spread of Covid-19.
Amazon jumped 5.7 per cent following a broker upgrade. Investment firm Bernstein said the recent pullback in the tech sector offered an attractive entry. Facebook climbed 2.7 per cent, Apple 1.6 per cent, Alphabet 2.1 per cent and Netflix 0.8 per cent.
“The market is looking for some stability. Once again investors and traders are going to look to names that had gotten unduly beaten up,” Kenny Polcari, chief market strategist at SlateStone Wealth in the US, told Reuters.
The major indices closed near session highs after Federal Reserve Chair Jerome Powell reiterated the central bank’s commitment to support the economy “for as long as it takes”. Powell said economic activity had picked up but remained well below pre-pandemic levels.
European stocks inched higher after their worst slump in three months. A day after tumbling 3.2 per cent, the Stoxx 600 gained 0.2 per cent. Britain’s FTSE rose 0.43 per cent despite fresh restrictions that included early closing times for pubs and restaurants and a request for people to work from home if possible.
Australian outlook
The ASX looks short-term oversold and ripe for a bounce today, barring unexpected news. However, the themes that played out overseas have less relevance here. While Europe lurches back towards lockdown, declining coronavirus infection rates are encouraging Australian state governments to relax border restrictions.
The local technology sector seems to have built a base near its August lows and should follow the Nasdaq higher. Also strong in the US overnight: consumer discretionary +3 per cent, communication services +1.9 per cent and real estate +1.3 per cent.
The banks remain a worry. The ASX financial sector sagged yesterday to a near four-month low and has weak leads this morning: the S&P financial sector sagged 0.8 per cent.
The recent stock market turmoil has handed exporters a weaker dollar. The Aussie, which traded at two-year highs above 74 US cents at the start of the month, fell 0.8 per cent overnight to 71.71 US cents.
Commodities
The US energy sector slid 1 per cent despite a modest recovery in oil. Brent crude settled 28 cents or 0.7 per cent ahead at US$41.72 a barrel.
BHP and Rio Tinto suffered mild losses as iron ore dropped below US$120 a tonne. BHP’s US-listed stock gave up 0.06 per cent and its UK-listed stock 0.18 per cent. Rio Tinto shed 0.31 per cent in the US and 0.66 per cent in the UK. The spot price for ore landed in China dropped $3 or 2.5 per cent to US$117 a dry ton.
Gold eased for a second day as virus fears continued to fuel a rally in the US dollar. Gold for December delivery settled $3 or 0.1 per cent lower at US$1,907.60 an ounce.
Copper rebounded as Chinese buyers took advantage of a pullback from two-year highs. Benchmark copper on the London Metal Exchange rose 1.3 per cent to US$6,808 a tonne. Nickel gained 0.5 per cent, zinc 0.2 per cent and tin 0.8 per cent. Aluminium and lead eased 0.2 per cent.
“This morning Chinese buyers have been quietly picking up relatively cheap metal as they were never going to chase the market but just wait for an overdue correction,” Malcolm Freeman at Kingdom Futures wrote.
