8@eight: ASX set to extend winning streak

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The Australian sharemarket is poised to make it four-straight days of gains, as rising investor sentiment on Wall Street sent stocks surging. Futures at 7.10am AEDT are pointing to a gain of 184 points, or 3.6 per cent, at the open for the ASX. On Thursday, the ASX made it three-straight winning sessions as it added 2.3 per cent.

1. A very bullish night’s trade: The price-action in global markets overnight was very bullish, with risk-assets almost ubiquitously rallying. The markets have welcomed the US Senate’s unanimous vote to pass a $US2 trillion ($3.3 trillion) fiscal spending bill to support the US economy through the COVID-19 crisis.

Wall Street has just recorded its best three-day stretch since the 1930s.

Wall Street has just recorded its best three-day stretch since the 1930s.Credit:NYSE

And risk-taking is also being underwritten by the clear conviction from the world’s largest central bankers to buy practically any quantity of financial assets to stabilise the financial system.

2. US stocks exiting bear market: Benchmark global stock indices have recorded a third successive day of gains, prompting calls in the market that the bottom of the bear market is “in”.

The Dow Jones, for one, has rocketed out of a technical bear market, surging in excess of 20 per cent from the lows registered on Monday. The US Dollar also tumbled overnight, signalling the mad-rush to safety and liquidity in the market could be ending.

3. Markets welcome “unlimited” QE: On top of the passage of the US fiscal stimulus bill through the Senate, central bank talk and actions bolstered market sentiment. In a TV interview overnight, US Federal Reserve Chair Jerome Powell implored to the American public the Fed “will not run out of [monetary policy] ammunition”.

And in Europe, the ECB announced it would be removing limits on its bond purchasing program, mirroring the Fed’s new “unlimited” QE program.

4. Stocks surge across the globe: Hence, given the bazookas fired by fiscal and monetary policymakers in the past week, global stock markets have continued to surge. The S&P500 rallied, in a day of very broad-based gains, but one that saw the market skew their buying towards defensive stocks, with the health care and utility stocks outperforming.

In European trade, the gains were slightly narrower. The DAX edged higher by 1.28 per cent, and FTSE100 climbed 2.24 per cent.

5. AUD rises, oil prices drop: In currencies and commodities, the US Dollar’s fall supported a rally in the AUD/USD above the 60-cent mark this morning; while GBP led the G10 currency map, leaping 2.5 per cent. Gold prices rose slightly, as sovereign bond yields fell.

Bucking the broader theme, however: oil prices fell, quite concerningly, with WTI prices dropping in excess of 6 per cent, after the Trump administration withdrew its tender to purchase oil for the country’s emergency reserves.

6. Fundamentals remain sketchy: For all the optimism, some stark realities remain about the current climate for the global economy. US jobless claims data came-in far worse than expected, revealing a record 3.283 million Americans applied for unemployment benefits last week. And the COVID-19 crisis is still well out of control. The number of global cases jumped above 500,000 last night, with the number of US cases coming close to exceeding the number reported in China.

7. ASX set to rise: The ASX200 is set to spike higher this morning, following Wall Street’s lead, as it attempts to take its winning streak of daily gains to four. SPI futures are indicating the index ought to jump by 184 points, backing-up a day that saw it climb by 2.3 per cent.

The gains yesterday were paced by growth names in the IT and healthcare sectors, signalling the markets willingness to gain exposure to higher risks.

8. Market watch:

ASX futures up 186 points or 3.6% to 5304 near 7am AEDT

  • AUD +1.8% to 60.66 US cents at 7.05am AEDT (Overnight peak 60.71)
  • On Wall St near 4pm: Dow +6.4% S&P 500 +6.2% Nasdaq +5.6%
  • In New York, BHP +1.4% Rio +2.8% Atlassian +6.5%
  • In Europe: Stoxx 50 +1.7% FTSE +2.2% CAC +2.5% DAX +1.3%
  • Spot gold +1.4% to $US1639.61 an ounce at 1.50pm New York time
  • Brent crude -3.4% to $US26.45 a barrel
  • US oil -7.5% to $US22.65 a barrel
  • Iron ore -0.7% to $US86.77 a tonne
  • Dalian iron ore futures +0.7% to 662 yuan
  • LME aluminium +0.5% to $US1545 a tonne
  • LME copper -1% to $US4805 tonne
  • 2-year yield: US 0.28%
  • 5-year yield: US 0.50%
  • 10-year yield: US 0.83% Australia 0.90% Germany -0.37%
  • US yields as of 4.15pm New York time

This column was produced in commercial partnership between The Sydney Morning Herald, The Age and IG

Information is of a general nature only.