ASX to open higher, Wall St extends rally

Australian shares are set to extend their bounce amid further gains on Wall Street.

ASX futures were up 173 points or 3.3% to 5291 near 5.35am AEDT.

The local currency leapt 1.8% to US60.67¢ at about 5.50am AEDT. Bank of America though cut its forecast for the Aussie, saying it expects it to fall toward US56¢ by the end of June.

In New York, all three major benchmarks were higher as the $US2 trillion relief bill progressed through Congress. The Dow was up 1000 points or 4.7% to 22,201 at 2.46pm.

Markets dismissed the surge in jobless claims to more than 3 million in the latest week, which were widely expected. Many economists also said they expected the number to be higher than what was reported and that the number of claims would multiply over the next few weeks too.

LPL Financial said: “Markets may not be responding to the dramatic numbers seen this morning, but they have been absorbing the rapidly changing economic expectations it represents over the last few weeks.

“We’ll see a lot of this over the next couple of months: historic numbers with markets seemingly unmoved. But it’s not because they’re indifferent. Economic data is slow moving and backward looking, while our economic reality has been changing at an unprecedented pace.

“Even new unemployment claims, which are released weekly, seem somewhat stale. Markets will still be reacting to shifting expectations of the depth and duration of the slowdown, as well as the effectiveness of policies to help businesses and workers get to the other side.”

For the latest virus news, click here.

Today’s agenda

Local: NZ ANZ consumer confidence March

Overseas data: China industrial profits February, Current account fourth quarter final; UK nationwide house prices March; US February personal income, spending and PCE core, University of Michigan consumer sentiment March final

Market highlights

ASX futures up 173 points or 3.3% to 5291 near 5.35am AEDT

  • AUD +1.8% to 60.67 US cents at 5.51am AEDT (Overnight peak 60.71)
  • On Wall St near 2.45pm: Dow +4.7% S&P 500 +4.6% Nasdaq +4%
  • In New York: BHP +0.2% Rio +2.1% Atlassian +4.9%
  • Dow advancers: Boeing +13.7%, Walgreens +7.9%, Intel +6.2%
  • 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
  • 10-year yield: US 0.79% Australia 0.90% Germany -0.37%

From today’s Financial Review

Retailer rent revolt hits mall landlords: The rent strike pitches Australia’s most successful retailer Solomon Lew against one of its wealthiest shopping centre landlords, Rich Lister John Gandel.

How Geoff Lloyd is running MLC from his dining room: From self-isolation on Sydney’s lower north shore, MLC CEO Geoff Lloyd is commanding more than a thousand financial advisers to calm the community angst.

Jennifer Hewett: Tough choices to come on COVID-19: The Morrison government argues it is possible to make a distinction between saving lives and saving livelihoods. The real problem will be if this ends up being a false choice.

The AFR View: Fight the virus, don’t rebuild fortress Australia: Like previous global struggles, the fight against COVID-19 will shape the political and economic contours of the next 20 years.

United States

US jobless claims soar to record-breaking 3.3m: Unemployment claims are now more than four times the previous record set in 1982 – a stunning reflection of the damage the viral outbreak is doing to the US economy.

Europe

The pan-European STOXX 600 index closed 2.6% higher, adding nearly 15% over the past three sessions. The index had fallen up to 2% earlier in the day.

The index is still down 26% from a record peak hit in February, with a recession in Europe looking imminent in the wake of widespread disruption to business due to coronavirus.

European Union lawmakers were expected later on Thursday to approve emergency funds to cushion the bloc’s economic slump triggered by the pandemic and shore up hard-hit airlines by preserving their landing slots.

Overnight, the European Central Bank ditched a cap on how many bonds it could buy from any single euro zone country, clearing the way for potentially unlimited money-printing as part of its response to the outbreak.

“Seems that markets think the medicine has been found and that medicine is money. Today’s mover clearly is the jobless claims report,” said Teeuwe Mevissen, senior macro strategist at Rabobank.

“Market consensus is that this frightening figure was already priced in or could have been worse. I don’t buy this in all honesty. I think markets seem to not realize the true nature of what is going on and are priced for perfection.”

Asia

Life after lockdown: ‘Fear of the virus will linger for a long time’: Life is returning to the streets of Wuhan, coronavirus ground zero, but many of the city’s residents say there will be long-term wounds from the outbreak which will take years to heal.

At the close of trade on Thursday, the Hang Seng index was down 174.85 points or 0.74% at 23,352.34 after gaining more than 8% over the previous two days. The Hang Seng China Enterprises index fell 0.86% to 9447.56.

China’s main Shanghai Composite index closed down 0.6% at 2764.91 points, while the blue-chip CSI300 index ended down 0.66%.

Japanese shares took a tumble on Thursday following three days of massive gains after a rise in domestic coronavirus cases stoked worries of tougher domestic restrictions for social distancing.

The Nikkei share average dropped 4.51% to 18,664.60. It had risen 18% in the last three sessions, including an 8% gain the previous day – its biggest since 2008.

Currencies

Bank of America on the $A: “We revise down our forecasts to account for the severe global disruption, forecasting 0.56 by the end of June 2020 – but highlighting meaningful downside risk over this period depending upon market conditions. We expect only a modest recovery to 0.62 by end 2020, driven by the lagged impact of China easing on commodity intensive sectors and once coronavirus uncertainty dissipates.

“A quicker resolution of the global pandemic and the consequent rebound in pent-up demand would be the key upside risk to our forecast.”

BofA on the $NZ: “We revise down our forecasts to account for our new baseline of global recession and associated spillover to New Zealand. We forecast NZD/USD at 0.54 by the middle of 2020 with downside risks depending upon market conditions. We expect only a modest recovery to 0.60 by end 2020, driven by the lagged impact of China easing and once coronavirus uncertainty dissipates.”

Further strain expected in state-issued bonds: A rise in semi yields was attributed to banning key sales activities in the residential property sector from Wednesday night on account of the COVID-19 pandemic.

Commodities

Global oil demand is in freefall because of the coronavirus pandemic, a situation that is exacerbated by the price war between Saudi Arabia and Russia, according to the head of the International Energy Agency.

“Today 3 billion people in the world are locked down. As a result of that, we may see demand fall about 20 million barrels a day,” IEA Executive Director Fatih Birol said in a press briefing on Thursday.

South Africa’s main export terminals will close to mineral exports from midnight, when a nationwide 21-day lockdown to try to contain the coronavirus begins, disrupting copper and cobalt supplies from the Democratic Republic of Congo and Zambia.

Miners in the African copperbelt, which accounts for more than a tenth of global production, typically transport copper overland to South Africa’s ports, where it is exported mainly to China.

Australian sharemarket

ASX comeback rolls on as US clears $3.4tn rescue bill

The S&P/ASX 200 index closed 2.3 per cent higher at 5113 points meaning the local sharemarket has now recovered 12.5 per cent since March 22 on its best three-day gain since the global financial crisis in 2008.

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