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The share market was poised to add to yesterday’s bumper gains after Wall Street surged on stimulus hopes and news President Donald Trump intended to leave hospital this morning.
ASX SPI200 index futures rallied 26 points or 0.4 per cent, signalling a positive start to the session ahead of this afternoon’s Reserve Bank rate announcement and tonight’s Federal Budget. The S&P/ASX 200 soared 2.6 per cent yesterday amid expectations for a federal cash-splash and a possible rate cut as US futures responded to signs the president’s condition was improving.
Wall Street
US stocks rose to session highs after President Trump tweeted he would leave hospital this morning. “I will be leaving the great Walter Reed Medical Center today at 6:30 P.M,” he wrote. “Feeling really good! Don’t be afraid of Covid. Don’t let it dominate your life” Trump’s doctor said the president “may not be entirely out of the woods yet”, but met all the necessary criteria for discharge. He would receive another dose of remdesivir before returning to the White House.
The S&P 500 climbed 60 points or 1.8 per cent, reversing all of Friday’s losses which followed news the president had Covid-19. The Dow Jones Industrial Average rose 466 points or 1.68 per cent and the Nasdaq Composite 257 points or 2.32 per cent.
Stocks were already ahead following reports Treasury Secretary Steven Mnuchin and Democrat House Speaker Nancy Pelosi spoke for an hour, sharpening hopes of a breakthrough in a long-running stalemate over the size and details of a second coronavirus relief package for Americans. Pelosi’s chief of staff said the two sides planned “to exchange paper” in preparation for further talks tonight.
“There’s more optimism around a bill coming to the market sooner rather than later,” Keith Buchanan, portfolio manager at GLOBALT Investments in the US, told Reuters. “We need another layer of assistance as the economy is still under tremendous stress that has come from the virus.”
Australian outlook
The ASX rebounded sharply yesterday and looks to have more in the tank as fund managers position for a possible rate cut and what is expected to be a stimulatory budget from Treasurer Josh Frydenberg tonight. The Reserve Bank is due to release a policy statement at 2.30 pm AEST. The market is pricing in a 67 per cent chance of a cut from a record-low 0.25 per cent to 0.1 per cent.
Banks were big winners yesterday, along with engineering and construction firms expected to benefit from federal infrastructure spending. The Treasurer has already flagged changes to responsible lending laws to make it easier for banks to lend and borrowers to borrow. Prime Minister Scott Morrison’s government has announced it will spend $7.5 billion on transport infrastructure.
The dollar firmed 0.16 per cent to 71.84 US cents ahead of today’s announcements.
Energy stocks outperformed here yesterday and shone in the US overnight. The US energy sector rallied 2.9 per cent, outpacing gains of 2.3 per cent for technology and 2.1 per cent for heath. Defensive sectors trailled but also recorded gains.
Commodities
Oil surged more than 5 per cent as a Norwegian strike added fuel to the rally. Brent crude settled $2.02 or 5.1 per cent ahead at US$41.29 a barrel, reversing more than half of last week’s slump. Norwegian producer Equinor said four fields in the North Sea had been forced to halt production due to strike action.
BHP and Rio Tinto shrugged off soft sessions in the UK as sentiment improved in the US. BHP’s US-listed stock put on 1.38 per cent after its UK-listed stock dipped 0.12 per cent. Rio Tinto added 1.22 per cent in the US after easing 0.16 per cent in the UK. With Chinese markets closed for Golden Week holidays, the spot price for iron ore landed in China was steady at US$123.15 a dry ton.
Gold climbed to its highest level in more than a week as talk of a US stimulus deal weighed on the greenback. Gold for December delivery settled $12.50 or 0.7 per cent higher at US$1,920.10 an ounce.
Copper remained under pressure after Friday’s seven-week low. Benchmark copper on the London Metal Exchange sank 0.5 per cent to US$6,514.25 a tonne. Aluminium gained 0.7 per cent, nickel 1.6 per cent and tin 1.5 per cent. Lead fell 0.7 per cent. Zinc was flat.
