Australian shares are set to open sharply higher as Wall Street’s tech-heavy Nasdaq index hit a record high, and global markets continue to recover from a coronavirus sell-off.
Market snapshot at 8:05am (AEDT):
- ASX SPI futures +0.7pc at 6,934, ASX 200 (Tuesday’s close) +0.4pc at 6,948
- AUD: 67.38 US cents, 51.69 British pence, 61 Euro cents, 73.75 Japanese yen, $NZ1.038
- US: Dow Jones +1.4pc at 28,808, S&P 500 +1.5pc at 3,298, Nasdaq +2.1pc at 9,468
- Europe: FTSE 100 +1.6pc at 7,440, DAX +1.8pc at 13,282, CAC +1.8pc at 5,935, Euro Stoxx 50 +1.9pc at 3,662
- Commodities: Brent crude -0.7pc at $US54.09/barrel, spot gold -1.4pc at $US1,554.05/ounce, iron ore +4.2pc at $US83.76/tonne
By 7:20am (AEDT), ASX futures were up 47 points, or 0.7 per cent.
The Australian dollar lifted back to 67.3 US cents after the Reserve Bank kept interest rates steady on Tuesday.
Investors will be listening closely to RBA governor Philip Lowe, who will give a speech titled The Year Ahead at the National Press Club, in Sydney today.
Gold prices dropped as investors regained their appetite for risky assets. The precious metal’s spot price fell to $US1,554 an ounce.
Meanwhile, Brent crude slipped to $54.21 a barrel and is trading around a one-year low, over concerns about weaker global oil demand as a result of the coronavirus.
Rising pool of stimulus
Meanwhile, overseas markets shrugged off concerns about the virus outbreak and its economic impact, after reports that China may take further action to stimulate its economy.
China’s government is debating whether to lower the planned 2020 economic growth target of around 6 per cent (which many private sector economists see as well beyond China’s reach), Reuters reported, citing Chinese sources who are involved in internal policy discussions.
The People’s Bank of China is likely to lower its key lending rate, the loan prime rate (LPR), on February 20, and cut banks’ reserve requirement ratios (RRRs) in the coming weeks, according to the sources.
China’s central bank has already pumped 1.7 trillion yuan ($360 billion) into its financial system since the week began.
The stimulus boosted investor sentiment even as several economists cut forecasts for 2020 global growth as the fast-spreading virus hampers business operations in the world’s second-largest economy.
“If China is doing what it needs to contain the worst-case scenario from a financial perspective, then maybe the weakness we saw last week was a little overdone,” said Willie Delwiche, investment strategist at Baird.
Risk appetite surges
On Wall Street, the Dow Jones index finished its day with strong gains — up 439 points (1.4pc) to 28,808.
The benchmark S&P 500 and tech-heavy Nasdaq indices jumped 1.5 and 2.1 per cent respectively.
The Nasdaq climbed to its highest level ever, posting its biggest one-day gain in almost six months.
It was the only US index to have completely recovered (so far) from the recent coronavirus sell-off.
Shares of Alphabet (Google’s parent company) fell 2.5 per cent, after the tech giant posted its first holiday-quarter revenue miss in five years.
But stocks that have been hit hard by fears of the virus’ economic impact experienced a rebound.
Apple jumped 3.3 per cent, while cruise-line company Carnival gained 1.9 per cent.
“What history has shown us is anytime there is any sort of epidemic or some global threat from a virus standpoint, what we have seen is that the market will bottom,” said Lindsey Bell, chief investment strategist with Ally Invest.
“Everybody is just looking past that, even though the market didn’t move that much lower on the news, at least here in the US.”
Adding to the optimism was data that showed new orders for US-made goods rose by its highest level in nearly one-and-a-half years in December. It comes a day after a surprise rebound in factory activity in January.