A new week looks set for a flat open despite strong gains on Wall Street as buyers bet the economic impact of the coronavirus has peaked.
Australian index futures edged up just three points or less than 0.1 per cent despite indications the economy is starting reopen. The S&P/ASX 200 rose 27 points or 0.5 per cent on Friday as Prime Minister Scott Morrison announced a three-stage plan to lift lockdown restrictions. Over the weekend several states announced plans to ease social-distancing measures and allow cafes and restaurants to reopen.
The week ahead will bring greater clarity on the impact of the pandemic. Thursday’s jobs report is expected to show a massive surge in unemployment from 5.2 per cent to around 8.3 per cent as more than half a million Australians were thrown out of work. Before that, reports are due tomorrow on business confidence and on Wednesday on consumer sentiment.
US stocks surged after the worst jobs report on record came in slightly better than economists feared. The unemployment rate jumped to 14.7 per cent last month from 4.4 per cent as the economy shed a record 20.5 million jobs. Both numbers were modestly ahead of median estimates of 21.5 million jobs and a jobless rate of 16 per cent among economists polled by Dow Jones.
The S&P 500 rallied 49 points or 1.69 per cent to seal a weekly advance of 3.5 per cent. The Dow put on 455 points or 1.91 per cent. The Nasdaq added 142 points or 1.58 per cent. All three major US indices secured their first weekly advances in three weeks.
“You have investors that seem to be able to look through the tsunami of negative economic data and earnings and towards the potential for a gradual reopening of the economy,” Art Hogan, chief market strategist at National Securities in the US, told CNBC.
Apple rose 2.4 per cent on news that it will start to reopen select stores in the US this week. Uber tacked on 6 per cent after reporting a revival in bookings in recent weeks.
The recovery in the US has been so strong that the S&P 500 has bounced 30 per cent from its COVID-19 low to just 13.6 per cent off its all-time high. By contrast, the S&P/ASX 200 has rebounded 22.5 per cent and is 33.5 per cent from its February record peak.
All 11 US sectors advanced on Friday, led by a 4.3 per cent surge in energy and gains of at least 2.4 per cent in industrials and materials. BHP’s US-listed stock gained 2.42 per cent and its UK-listed 2.93 stock per cent. Rio Tinto added 2.51 per cent in the US after closing flat in the UK.
Iron ore prices soared on Friday amid reports that the coronavirus was spreading rapidly through the northern state that produces much of Brazil’s output. The spot price for iron ore landed in China jumped $4.25 or 5 per cent to US$88.45 a dry ton. Trade in industrial metals on the London Metal Exchange was suspended for a UK holiday.
US market sentiment was boosted by news trade talks with China had recommenced, signalling an easing of hostilities between the two nations. President Donald Trump had threatened to impose new tariffs on Chinese goods in retaliation for the communist government’s mishandling of the initial outbreak of the virus.
Both US and global oil benchmarks put on 5.1 per cent on Friday. West Texas Intermediate advanced $1.19 to US$24.74 a barrel. Brent crude settled $1.51 ahead at US$30.97. The US benchmark rose 25 per cent last week. Brent gained 17.1 per cent.
A choppy session saw gold finish lower as not even the worst US unemployment rate since the Great Depression could derail interest in riskier assets. Gold for June delivery settled $11.90 or 0.7 per cent lower at US$1,713.90 an ounce.
The dollar started the new week barely changed, rising 0.02 per cent this morning to 65.3 US cents.