Australian shares are likely to open slightly higher following a wave of optimism on global markets as more countries, and some US states, look to ease their COVID-19 lockdowns.
ASX futures were up 5 points (or 0.1 per cent) by 8:00am AEST.
Meanwhile, the Australian dollar jumped (+1.2pc) to 64.6 US cents, around its highest value in seven weeks.
“While [there is] no single driver, the move reflected growing optimism that containment restrictions will be lifted in Australia come May 11 with WA and Queensland announcing an easing in restrictions on Sunday,” NAB’s director of economics, Tapas Strickland, said.
The Aussie dollar’s jump was also due to a weaker US greenback, as traders cheered the prospect of easing lockdowns even as health experts warned the United States was not doing enough coronavirus testing.
Spot gold fell (-0.8pc) to $US1,714.20 an ounce as investors regained their appetite for riskier investments.
Cautiously optimistic rally
The local share market is expected to follow a strong lead from Wall Street, which saw the Dow Jones index jump 359 points (or 1.5pc) to 24,134.
The benchmark S&P 500 and tech-heavy Nasdaq indices lifted by 1.5 and 1.1 per cent respectively.
European markets closed even higher, with London’s FTSE up 1.6 per cent and Frankfurt’s DAX surging 3.1 per cent.
From Italy to Australia and New Zealand, governments have announced the easing of restrictions.
Britain said it was still too early to relax them there, while New York State is not expected to re-open for weeks.
The US state of Georgia began letting residents dine at restaurants and watch movies at cinemas, while other states from Minnesota to Mississippi also took steps to ease coronavirus restrictions.
“There’s cautious optimism that the economy across the country is moving toward restarting,” said Robert Pavlik, chief investment strategist at SlateStone Wealth in New York.
‘So many things … can go wrong’
Investors were also optimistic that central banks would inject more stimulus into their economies, making it cheaper to borrow money and drive up share prices to exuberant levels that do not reflect the real economy.
The Bank of Japan pledged to buy an unlimited amounts of government bonds yesterday, while the US Federal Reserve and European Central Bank meet later in the week.
Trillions of dollars worth of stimulus have helped the S&P 500 recover nearly 30 per cent from its March lows.
But some analysts say more gains may be capped as the economic damage grows, unless there is progress on treatments for the disease.
“There are so many things that can go wrong in the next six months,” said Marc Chaikin, founder of Chaikin Analytics in Philadelphia.
Meanwhile, the optimism was offset slightly by a further collapse in oil prices.
The international benchmark, Brent crude, fell 6.8 per cent to $US19.99 a barrel.
West Texas crude, for delivery in June, plummeted by 23.7 per cent to $US12.93 per barrel.
Investors are worried there is not enough storage space as the coronavirus pandemic, with its associated lockdowns and travel restrictions, continues to destroy demand for oil.