A volatile reversal session on Wall Street points to strong opening gains for the ASX amid hopes a correction in US tech giants marked a turning point in the recent rout.
ASX futures surged 107 points or 1.6 per cent as upbeat jobs data and a fade in bond yields helped US stocks rebound.
Wall Street's benchmarks finished between 1.55 and 1.95 per cent higher. Oil logged its highest close since 2019. Iron ore, copper and gold retreated. The dollar fell below 77 US cents.
A pop and fade in bond yields took equity investors on another wild ride. The Nasdaq Composite lost as much as 2.6 per cent in early action as yields again cracked 1.6 per cent. The growth stock-heavy index reversed to a final gain of 197 points or 1.55 per cent as yields fell back to 1.55 per cent.
The S&P 500 followed a similar path. The broadest of the three indices flipped an early decline of around 1 per cent into a final gain of 73 points or 1.95 per cent. The Dow Jones Industrial Average put on 572 points or 1.85 per cent.
“Yields ticked down from the move earlier, and that helped underpin the market’s climb higher,” Quincy Krosby, Chief Market Strategist at Prudential Financial, said. “As tech names were moving into correction territory, by most measures the tech sell-off had reached oversold levels and were due for investors and traders to begin buying.”
Investors snapped up cyclical sectors after jobs data indicated the economy gathered momentum last month. Non-farm payrolls jumped by 379,000, almost twice the 210,000 jobs economists expected. The unemployment rate dipped to 6.2 per cent from 6.3 per cent, again beating expectations.
The energy sector surged 3.9 per cent, industrials 2.4 per cent and materials 2.4 per cent. Tech stocks gained almost 2 per cent. Microsoft, Apple and Alphabet rebounded as investors ran a ruler over fallen angels.
"Next week, I would expect volatility to continue, with pockets of opportunity, with certain things that sold off potentially rebounding," Jake Dollarhide, chief executive officer of Longbow Asset Management, told Reuters on Friday.
The Nasdaq Composite fell into correction territory before reversing. The index dropped more than 10 per cent from its all-time high before closing around 8 per cent off its peak on Friday. The index lost 2.1 per cent last week. Friday's reversals helped the S&P 500 rise 0.8 per cent for the week and the Dow add 1.8 per cent.
A bright start ahead, with further market-friendly news coming over the weekend. President Joe Biden's US$1.9 trillion coronavirus relief plan cleared a major hurdle as the Senate voted 50-49 in favour of the legislation. The revised American Rescue Plan now returns to the Democrat-controlled House of Representatives for another vote, expected tomorrow night.
In addition, a report yesterday showed Chinese exports expanded at a record pace last month from the Covid-affected downturn. Exports increased 154.9 per cent last month from the same month last year.
The S&P/ASX 200 has weathered the US bond storm fairly well and should open today back above the 6800 level. The index lost 50 points or 0.74 per cent on Friday, halving its loss after touching its weakest level in a week.
Trading volumes this session will be impacted by state holidays in Victoria, Tasmania, South Australia and the ACT
The week ahead offers few distractions from the volatility on bond markets. The economic calendar is light - business confidence on Tuesday, consumer sentiment on Wednesday. The week's big-ticket domestic event is a speech on Wednesday from RBA Governor Philip Lowe titled "The Recovery, Investment and Monetary Policy". Investors will look for any hint of change in the central bank's policy settings to reflect the rise in yields.
In the US, Wednesday night's inflation report will attract more interest than usual. Thursday night's weekly update on jobless claims is another potential market-mover.
Around 60 companies are due to trade this week without the rights to dividends. Prominent names include South32, Brambles, Nick Scali and Ramsay Healthcare.
The dollar climbed 0.24 per cent this morning to 76.88 US cents.
Oil surfed an extension to production curbs to its highest level since May 2019. Brent crude settled $2.62 or per 3.9 cent ahead at US$69.36 a barrel. The Organization of the Petroleum Exporting Countries and allies last week decided to roll over production caps until the end of next month.
Gold slipped to a third straight weekly loss. Metal for April delivery settled $2.20 or 0.1 per cent weaker at US$1,698.50 an ounce. Prices declined 1.8 per cent last week, continuing a weak run as investors favoured assets with better exposure to economic growth.
BHP and Rio Tinto attracted buyers in the US after setbacks in Australia and the UK. BHP's US-listed stock added 0.49 per cent after its UK-listed stock eased 0.99 per cent. Rio Tinto gained 2.12 per cent in the US after losing 0.41 per cent in the UK. The spot price for iron ore landed in China dropped $3.80 or 2.1 per cent to US$174.65 a tonne.
Copper finished off its lows as the market mood improved. Benchmark copper on the London Metal Exchange eased 0.2 per cent to US$8,913.20 a tonne. Aluminium improved 1.1 per cent, nickel 1.9 per cent, zinc 0.9 per cent and tin 6.5 per cent. Lead shed 0.7 per cent,.