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The share market looks set for a muted open as cautious investors wait to see if an overnight rebound on Wall Street has more legs than last week’s one-session wonder.
With global markets trending firmly lower over the last week and a half, ASX SPI200 index futures declined 13 points or 0.2 per cent despite solid gains in the US and advances in iron ore and metals.
Wall Street
US stocks kicked higher as market sentiment was boosted by vaccine news and a round of corporate deals. The S&P 500 rose 43 points or 1.27 per cent. The Dow Jones Industrial Average gained 328 points or 1.18 per cent. The Nasdaq put on 203 points or 1.87 per cent.
Drugmaker AstraZeneca announced it had resumed clinical trials in the UK of its coronavirus vaccine after a brief pause when a patient suffered an adverse reaction. A separate US trial remained on hold, pending approval to resume from American regulators. The Australian government has ordered millions of doses of the vaccine if it proves safe and effective. Rival Pfizer said it could have a vaccine available in the US by the end of the year.
“The market loves anything with a vaccine because that is the ultimate solution here,” Tim Ghriskey, chief investment strategist at Inverness Counsel in the US, told Reuters.
A flurry of corporate deals soothed concerns about inflated valuations after the market’s strong run since March. Biotech Gilead announced it was willing to pay a sharp premium to acquire breast cancer drug developer Immunomedics. Computer chipmakers were boosted by news Nvidia will buy Arm Holdings from Japanese multinational SoftBank. Oracle was named as TikTok’s strategic US partner after the app’s Chinese parent company ByteDance rejected a buy offer from Microsoft.
Aussie outlook
The S&P/ASX 200 arguably pre-empted overnight gains in the US with a rise of 40 points or 0.7 per cent yesterday despite mixed leads from Wall Street on Friday. Rising US index futures during yesterday’s Australian session signalled gains ahead and for once Wall Street did not disappoint.
Last night’s US action supported the bull case that Wall Street is stabilising at present levels following two weeks of losses. The S&P 500 has survived two tests of last week’s low but needs to move convincingly back above 3,400 to confirm a base. This morning’s negative futures reading suggests Australian traders want more evidence before committing.
Tech stocks and REITS outperformed in the US, both rising more than 2 per cent. However, the rally was broad enough to lift all 11 sectors. The defensive consumer staples and communications sectors brought up the rear. The financials, materials and industrials sectors all gained at least 1.3 per cent.
The dollar ticked higher as a falling greenback handed gold its biggest rise of the month. The Aussie edged up 0.12 per cent to 72.91 US cents. Gold for December delivery settled $15.80 or 0.8 per cent ahead at US$1,963.70 an ounce.
The minutes from last month’s Reserve Bank policy meeting are scheduled for release at 11.30 am EST. China is due to release a quartet of August economic reports half an hour later.
Commodities
Iron ore punched back US$130 a tonne on spot markets ahead of this morning’s Chinese economic update. The spot price for ore landed in China climbed $1.45 or 1.1 per cent to US$130.50. BHP’s US-listed stock lifted 1.24 per cent and its UK-listed stock 0.56 per cent. Rio Tinto eased 0.13 per cent in the US after gaining 0.16 per cent in the UK.
A reduced demand outlook from the Organization of the Petroleum Exporting Countries (OPEC) weighed on oil. Brent crude settled 22 cents or 0.6 per cent lower at US$39.61 a barrel. OPEC downgraded its demand expectations for the year from 9.5 million barrels a day to 9.1 million barrels, citing the dampening effects of Covid-19.
Copper has remained well bid during the stock market turmoil as Chinese stimulus efforts helped drive inventory levels to historic lows. Benchmark copper on the London Metal Exchange climbed 0.7 per cent overnight to US$6,814.50 a tonne. Aluminium gained 1.4 per cent, nickel 1.2 per cent, lead 2.1 per cent, zinc 0.4 per cent and tin 0.2 per cent.
