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Nervous investors have broadly positive leads for today’s session as the ASX prepares to re-open after yesterday’s system meltdown.
Vaccine news lifted US stocks to all-time highs. Oil and iron ore rallied. Copper hit its highest level in almost two and a half years. Mining giants BHP and Rio Tinto rose in overseas trade.
Nonetheless, futures trading suggested caution until the long cloud cast by yesterday’s technical glitch lifts. ASX SPI200 index futures edged up four points or less than 0.1 per cent to 6490.
The corporate regulator flagged possible action after the exchange operator halted trade less than half an hour into yesterday’s session. ASIC said it would explore whether the ASX had met its licence obligations. The exchange later announced the stoppage was linked to the launch of a new system provided by its technology partner, Nasdaq.
ASX Managing Director Dominic Stevens apologised for the disruption. Technicians had identified the problem and the exchange would re-open today. A system status update this morning said the market was on schedule to transition into “pre-open” as normal at 7 am EST.
Brokers warned of possible delays as they work to clear yesterday’s backlog. CommSec said the market would be busier than usual, which could result in delays in processing orders. The broker asked clients to be patient.
Wall Street
US stocks scaled fresh peaks after Moderna announced its Covid-19 vaccine was 94.5 per cent effective in a late-stage trial. The Dow Jones Industrial Average rose 471 points or 1.6 per cent to a record close.
The S&P 500 climbed 42 points or 1.16 per cent to its own record. The Nasdaq Composite put on 95 points or 0.8 per cent.
Stocks best placed to benefit from economic revival led the rally. The energy sector surged 6.5 per cent. The S&P 1500 airlines index added 4.4 per cent. On the Dow, planemaker Boeing jumped 8.2 per cent and theme park operator Disney 4.6 per cent. Cruise companies recorded gains of close to 10 per cent.
So-called ‘stay-at-home’ stocks were mostly left behind. Netflix dipped 0.8 per cent and Zoom Video 1.1 per cent. Amazon gained 0.1 per cent,
“Encouraging vaccine news continues to support pro-cyclical and value sectors, which have seen strong relative performance this month after a period of historic underperformance,” Mark Hackett, chief of investment research at Nationwide in the US, wrote. “Supporting this rotation is the prospect for additional stimulus, continued improvement in earnings, a historic valuation gap and the prospect for improving global trade under a Biden administration.”
Australian outlook
Futures trading suggests many investors will sit on their hands until they see whether the ASX has fixed its technical problems. Confidence is key in trading. No one wants to open a position if there is a question they might not be able to exit.
The systems failure may cause processing delays this morning as brokers clear backlogs. The sheer mass of unfilled orders will test the ASX’s systems capability. Looking further ahead, the exchange operator says it is upgrading its systems, raising the possibility of more mishaps in the weeks ahead.
Yesterday’s circus overshadowed an otherwise strong start to the week. The S&P/ASX 200 bolted 79 points or 1.2 per cent to a new eight-and-a-half month high in the 24 minutes the exchange was open for trade.
The sectors that carry the biggest weight on our index – financials and materials – both performed well in the US, rising 2.3 and 2 per cent, respectively. While energy was the night’s clear winner, industrials gained 2.5 per cent. Defensive sectors trailled. Health stocks eased 0.2 per cent despite a 9.6 per cent surge in Moderna.
The Reserve Bank releases the minutes from this month’s policy meeting at 11.30 am AEDT. Assistant Governor Chris Kent is due to address a virtual symposium at 9.30 am.
The dollar broke decisively back above 73 US cents overnight, lately up 0.4 per cent at 73.19 US cents.
Commodities
The US energy sector soared 6.5 per cent as oil was boosted by the demand implications of effective vaccines next year. Brent crude settled $1.04 or 2.4 per cent ahead at US$43.82 a barrel. The Organization of the Petroleum Exporting Countries and allies meets today and is expected to extend production curbs due to expire in January.
Gold stocks struggled as traders favoured assets with better exposure to an economic recovery. The NYSE Arca Gold Bugs Index eased 0.7 per cent. Gold for December delivery settled $1.60 or 0.1 per cent higher at US$1,887.80 an ounce.
“Investors are focused on Covid-19 and whether or not continued favourable news on a viable vaccine would cause stocks to rise, pulling money out of gold,” Adam Koos, president of Libertas Wealth Management Group, told MarketWatch.
Iron ore and copper got a lift from strong Chinese factory data yesterday. The spot price for ore landed in China rose $1.35 or 1.1 per cent to US$124 a tonne. Copper hit its highest level in 29 months on the London Metal Exchange. Three-month copper advanced 1.8 per cent ahead to US$7,092.75 a tonne.
“The strong macro China data is giving copper another ride higher and reinforces the view that China’s demand recovery is holding its shape,” ING analyst Wenyu Yao told Reuters.
Also in LME action, aluminium gained 1 per cent, lead 0.8 per cent, zinc 1.9 per cent and tin 1.9 per cent. Nickel finished flat.
BHP and Rio Tinto advanced in overnight trade. BHP’s US-listed stock added 1.94 per cent and its UK-listed stock 2.22 per cent. Rio Tinto gained 1.06 per cent on both markets.
