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Australian shares are poised to begin May with a sell-off as Wall Street fell on rising jobless claims and a collapse in consumer spending.

ASX futures were down 118 points or 2.1% to 5422 near 6am AEST. The local currency slid 0.7%.

Shares were lower on Wall Street and earlier fell across Europe. COVID-19 lockdown measures have now pushed US jobless claims to more than 30 million. The claims news came after the economy contracted at a 4.8% annual pace in the first quarter.

At the close in New York, the Dow was down 288 points or 1.2%. Apple and are due to post results shortly.

While risk-off selling pulled all three major U.S. stock averages into the red, the S&P 500 and the Dow posted their largest monthly percentage gains since January 1987, with the Nasdaq having its best month since June 2000.

The three indexes remain well within 20% of record highs reached in February, having quickly rebounded since shutdown efforts to curb the spread of the coronavirus pandemic brought the economy to a grinding halt.


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In a tweet, Mohamed El-Erian said: “Today’s across-the-board selloff in US #stocks takes little away from what has been a banner month…including gains of 11.2% and 15.5% for the Dow and NASDAQ respectively. By contrast, and despite the rebound of the last few days, #oil investors will wish to quickly forget April.”

As for the S&P 500, it advanced 12.7% in April, its best April since 1938, according to LPL Financial’s Ryan Detrick. It marks the best monthly gain since January 1987.

In a note, Mr Detrick said history hints that it might be time to be cautious, though these are not normal times.

“Right here and now we’d be careful after the record run stocks have seen, as a well-deserved break could be perfectly warranted. But with the dual benefits of record monetary and fiscal stimulus helping to bridge those most impacted by COVID-19, we continue to expect this recession to be one of the shortest on record and a much stronger economy later in 2020.”

Today’s agenda

Local: AiG performance of manufacturing April; CoreLogic house prices April, Producer prices first quarter

Overseas data: Japan Jibun manufacturing PMI April; UK Markit manufacturing PMI April; US Markit manufacturing PMI April final, ISM manufacturing April

Market highlights

ASX futures down 118 points or 2.1% to 5422 near 6am AEST

  • AUD -0.7% to 65.13 US cents
  • On Wall St: Dow -1.2% S&P 500 -0.9% Nasdaq -0.3%
  • In New York: BHP -3.4% Rio -5.5% Atlassian +1.8%
  • In Europe: Stoxx 50 -2.3% FTSE -3.5% CAC -2.1% DAX -2.2%
  • Spot gold -1.7% to $US1683.55 an ounce at 2.51pm New York time
  • Brent crude +12.6% to $US25.39 a barrel
  • US oil +24.6% to $US18.76 a barrel
  • Iron ore +1.9% to $US84.04 a tonne
  • Dalian iron ore +2.5% to 610 yuan
  • LME aluminium -1.1% to $US1489.50 a tonne
  • LME copper -1.3% to $US5196 a tonne
  • 2-year yield: US 0.19% Australia 0.20%
  • 5-year yield: US 0.35% Australia 0.41%
  • 10-year yield: US 0.62% Australia 0.88% -0.59%

From today’s Financial Review

Forrest among 20 Virgin Australia bidders: A consortium including the iron ore magnate, if formalised, could involve and his former right-hand man, David Baxby.

Rebounding WA warns v riling China: China is helping WA’s economy rebound, leaving its staggeringly popular premier loathe to join calls for an inquiry into the coronavirus outbreak that sparked fresh Sino-Australian tensions.

Chanticleer: Tension between banks and analysts is a good thing: With so much riding on the performance of banks during this crisis, the tension over the assumptions being used to plan COVID-19 scenarios is healthy.

The ‘outsider’ steering the MCA through the crisis: The new chairman of Sydney’s Museum of Contemporary Art is the daughter of Lebanese immigrants who saw no art growing up and chose investment banking without any private school connections.

United States

US jobless claims tops 30m on extended lockdown toll: The number of Americans who’ve sought jobless benefits because of COVID-19 shutdowns rose still higher. Data also pointed to a record collapse in consumer spending.

Europe

Trade minister challenges European supply chain rethink: The coronavirus pandemic shouldn’t be used as cover for costly economic nationalism, Simon Birmingham tells a Brussels think tank.

European shares fell from seven-week highs on Thursday after the European Central Bank held back on big policy moves.

Euro zone banks sank 5.5% as the central bank said it would pay more for banks to borrow from it but otherwise kept much of its remaining policy powder dry.

The banking sector also came under pressure from a 8.6% decline in France’s Societe Generale as it reported a quarterly loss, while Britain’s Lloyds Banking Group became the latest to be hit by provisions against expected bad loans due to the pandemic.

Along with a slide in as oil major Royal Dutch Shell slumped 10.8% on cutting its dividend for the first time in 80 years, London’s FTSE dived 3.5%. The index logged its steepest one-day loss in one month.

The wider oil & gas sector fell 3.4%

The pan-European STOXX 600 fell 2% after a three-day rally, while euro zone stocks were down 1.9%.

Asia

Hong Kong shares finished higher on Wednesday, lifted by financials after China’s biggest listed banks reported higher first-quarter profits.

At the close of trade, the Hang Seng index was up 67.63 points, or 0.28%, at 24,643.59. The rose 0.57% to 10,040.87.

China stocks rallied on Thursday to post their biggest monthly advance since December, after positive trial results for a drug to treat COVID-19 and downbeat data reinforced hopes of further stimulus to bolster the world’s second-largest economy.

The blue-chip CSI300 index ended up 1.2% at 3912.58, while the Shanghai Composite Index closed 1.3% higher at 2860.08.

For the month, CSI300 climbed 6.1%, while SSEC was up 4%, both posted their best monthly rise since last December, as investors cheered the reopening of some parts of the country and a raft of stimulus measures.

Currencies

ECB retains credit focus as eurozone contracts: The central bank further eased credit for banks though it won’t boost bond buying at least for now.

TD Securities recommend selling the euro: “While EURUSD has proved resilient in recent weeks, we think this is coming to an end. We think the EUR will feel the pull from the host of challenges facing the region.

“Specifically, we think the EUR will face rising headwinds from a combination of a dire growth outlook, rising political tensions, and a deteriorating capital flows backdrop. We examine each of these drivers in turn.

“We see this latest push toward 1.10 as an opportunity to enter short EURUSD positions. In line with this, we are adding this position to our FX Model Portfolio. We are targeting a move below 1.05.”

Commodities

Fortescue tries to block publication of iron ore prices: The has been accused of violating US publishers’ constitutional right to press freedom, after seeking to prevent publication of its iron ore prices.

Copper eased on Thursday as a private sector survey showed factory activity in China unexpectedly shrank.

Lingering fears for a long recovery ahead for China pulled benchmark copper on the London Metal Exchange (LME) down 1.3% to $US5196 per tonne by 1611 GMT.

The closely watched Caixin survey showed factory activity shrank last month as the coronavirus pandemic shattered global demand, sparking a substantial drop in export orders and more layoffs.

China accounts for nearly half of global copper consumption estimated at 24 million tonnes.

Fresh cancellations of 10,000 tonnes took on-warrant aluminium stocks available to the market in LME warehouses to 1.18 million tonnes.

But the LME inventories are still near their highest since December, having climbed about 78% since January 17.

LME aluminium eased 1.1% to $US1489.50 a tonne.

Australian sharemarket

The S&P/ASX 200 Index advanced 129 points, or 2.4 per cent, to 5522.4 on Thursday, rising to a six-week high as it extended its rebound from a heavy loss through February and March, rising 9.5 per cent through April.

Best month for shares since ’88 as Fed, COVID drug fuel rally: Renewed “whatever it takes” promises from the Fed and faith in Gilead’s virus treatment are keeping the bull market inside a bear market alive.

Bank dividends will disappoint for some time: Analysts believe the recovery in dividend payouts this time will not be as quick as during previous downturns.

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