ASX

ASX set to open higher after US sharemarkets rise

The Australian sharemarket is poised to open higher after Wall Street ended the week on a positive note

The Australian sharemarket is poised to open higher after US sharemarkets ended the week on a positive note.

Having looked on the cusp of ending an overall negative week on something of a negative note, Friday’s trade closed in a relatively positive fashion for risk assets. Asian and European equities did underperform on the day. The Nikkei dropped -0.86 per cent, the DAX fell -1.69 per cent and the FTSE100 shed -1.28 per cent. But renewed strength in US tech stocks managed to drive US equities higher on Wall Street. The S&P500 jumped 1.39 per cent, on a day where the VIX dropped to a 7-week low and the NASDAQ climbed 1.65 per cent.

Stock indices across the globe generally recorded declines over the duration of last week, as the combination of weaker corporate, soft economic data and a general dearth of positive headline risk slowed risk-assets recent recovery. Following Thursday’s disappointing global PMI figures and another spike in US jobless claims, the news flow Friday continued to hammer home the impacts of the COVID-19 economic shutdown. German ifo Business Climate numbers fell to 74.3 last month, UK Retail Sales contracted by -5.1 per cent month-over-month, and US Durable Goods order plummeted -14.4 per cent in March.

US earnings season also delivered a disappointing week of results, on-balance. According to data compiled by Fact Set, the blended earnings forecast for S&P500 companies for Q1 fell to 15.8 per cent, dropping from the -14.8 per cent estimate derived from the week prior. 60 per cent of the nearly one-quarter of firms that have already delivered results have surprised the market to the upside, well index’s long-term average. The biggest falls in EPS have thus far come from energy, consumer discretionary, and financials firm.

The market did find some degree of support from a further normalisation of oil prices. Although the fundamental problem of a growing oversupply of crude in the global economy persists, the price of WTI Crude leapt 23.8 per cent, as some of the technical factors causing chaos in oil futures markets this week dissipated. Oil’s recovery led the outperformance of cyclical sectors in the US stock market last night, with energy, industrials and materials stocks putting a floor under US indices.

Despite what was a dour day news wise, price action in broader markets proved more mixed. The Euro lifted off the back of growing hopes that Eurogroup leaders are inching towards a new fiscal stimulus package for the Eurozone economies, along with the decision by ratings agency S&P to maintain Italy’s sovereign credit rating at BBB and above junk status. European sovereign yields also fell across the board as a result of the news on Friday.

The stronger Euro saw other European currencies appreciate on Friday. It also led to a broad-based decline in the US Dollar, with the Dollar Index dipping 0.13 per cent. Even in light of the weaker greenback, the AUD/USD, in line with other commodity currencies, traded practically flat for the session, to close the week at 0.6370. The drop in the Greenback – along with generally lower bond yields — failed to boost the price of gold, which closed slightly lower at roughly $US1730.

Along with the strength in US stocks, the ASX200 stuck-out as a relative outperformer to end the week. The index climbed 0.49 per cent, led by gains in energy and materials stocks, as well as the health care sector. Despite Friday’s solid session, the ASX200 still found itself down 4.46 per cent for the week, as the index’s fluctuations broadly tracked the volatility in oil markets. Given Wall Street’s solid lead, SPI Futures are indicating that the ASX200 ought to jump 82 points when trading opens this morning.

ASX futures were up 82 points or 1.6 per cent to 5298.

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