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8@eight: ASX set for strong open

Further upside in US financial stocks will likely come under focus in tonight’s trade, however, after the US Federal Reserve announced post-market that to further sure-up capital buffers, it will be temporarily banning US banks from share buybacks and distributing dividends.

3. COVID-19 cases in US increase by most since May: The rally on Wall Street overnight confounded some, given what was an overall bad day’s news for the market. The unfolding COVID-19 second-wave is only growing in force, with the growth in new cases in the US hitting a multi-week high yesterday of 1.7 per cent.

The new virus hotspots have continued to struggle containing the latest outbreak. Both Texas and Florida announced a halting of re-opening measures, in a bid to curtail the spread of the virus, as the city of Houston reported it has met its capacity of ICU beds.

4. US initial jobless claims disappoint: The economic data released overnight also came as something of a disappointment to market participants. Weekly US jobless claims topped the docket, and revealed a larger than tipped 1.48 million Americans applied for jobless benefits last week, stoking concern once more that the recovery in the US economy may be taking longer than hoped to gain traction.

Perhaps a silver lining in the figures: continuing jobless claims did fall again marginally last week, to drop below 20 million people for the first time since the beginning of May.

5. A mixed day in currency markets: Despite what was a broadly positive day’s trade for stock markets, price action in FX markets proved slightly mixed. Risk-currencies generally outperformed, with the Australian Dollar, true to form, tracking US stocks higher, to close the day’s trade up 0.3 per cent.

The Kiwi Dollar and Swedish Kroner topped the G10 currency map, while the Japanese sat at its bottom. The US Dollar Index did edge higher however, in large part due to a broad-based decline in the Euro, which is being pinned by traders as a function of end of month flows.

6. ASX200 expected to reclaim some of yesterday’s losses: Wall Street’s positive lead has set up the ASX200 for a small recovery this morning, with SPI Futures indicating the local bourse ought to rally by 70-points at the open.

That in and of itself won’t reclaim the losses sustained by the market yesterday. It was a volatile and bearish day’s trade for the ASX200 on Thursday, with the index shedding 2.48 per cent, in a session of very broad based declines. The energy sector was the biggest loser, falling 4.62 per cent, while the real estate and IT sectors declined 3.9 and 3.3 per cent respectively.

7. Data light, focus on end of month activity: It’s shaping as a quiet day for global financial markets, at least as it applies to event risk. The economic and corporate calendars are short on tier-1 data.

Market participants will be keeping an eye on US consumer data, with US consumer sentiment and the PCE Index readings published this evening. Otherwise, as is wont to be the case this time of the month, the story may well focus on the issue of end of month flows and portfolio rebalancing, as investors close out a month that might be described as somewhat mixed.

8. Market watch:

ASX futures up 70 points or 1.2% to 5835 at 6.59am AEST

  • AUD flat to 68.86 US cents at 6.48am AEST
  • On Wall St: Dow +1.2% S&P 500 +1.1% Nasdaq +1.1%
  • In New York: BHP +2.1% Rio +2%
  • In Europe: Stoxx 50 +0.7% FTSE +0.4% DAX +0.7% CAC +1%
  • Spot gold flat at $US1763.76 an ounce
  • Brent crude +1.8% to $US41.05 a barrel
  • US oil +1.9% to $US38.72 a barrel
  • Iron ore flat to $US103.34 a tonne

This column was produced in commercial partnership between The Sydney Morning Herald, The Age and IG

Information is of a general nature only.

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