A currency trader checks the temperature of his colleague at the foreign exchange in Seoul. Picture: AP
A currency trader checks the temperature of his colleague at the foreign exchange in Seoul. Picture: AP

ASX jumps as Wall Street continues gains

The Australian share market has followed Wall Street higher at the start of trade even as warnings mount of worsening unemployment and economic conditions because of the coronavirus fallout.

The S&P/ASX200 benchmark index was up 41.4 points, or 0.75 per cent, at 5,529.5 points in the first 15 minutes of trade on Wednesday, the highest in a month.

The banks and healthcare stocks surged and only the energy sector sagged.

The All Ordinaries index was up 43.9 points, or 0.79 per cent, to 5,586.4.

 

The Australian share market has followed Wall Street higher at the start of trade. Picture: AAP
The Australian share market has followed Wall Street higher at the start of trade. Picture: AAP

 

US stocks rose overnight after the White House said President Donald Trump would make a number of announcements about reopening the US economy in the next day or two as the health crisis appeared to be easing.

However, the International Monetary Fund expects Australia to suffer its biggest economic blow since the Great Depression of the 1930s.

The IMF said it expected unemployment to remain high for at least two years beyond the coronavirus pandemic, with Australia to be among the bottom third of the world's top 20 economies.

Gold prices have hit their highest mark in seven years but oil has slipped as investors bet that a virus-driven drop in fuel demand destruction would be too much for global output cuts to offset.

The Australian dollar was buying 64.33 US cents at 1015 AEST, up from 64.10 US cents at the close of markets on Tuesday.

 

WALL STREET CONTINUES GAINS

US stocks soared Tuesday as investors looked forward to the reopening of the world's biggest economy, even as earnings reports from big banks indicated that the coronavirus is taking a toll.

The Dow Jones Industrial Average rose about 551 points, or 2.4 per cent, in midday trading, attempting to continue last week's historic rally. The S&P 500 jumped 2.8 per cent, and the Nasdaq Composite rose 3.7 per cent.

The early gains put the blue-chip index on track to log its fourth gain in the past six trading days. Stocks have climbed on indications the spread of the coronavirus is easing in hard-hit locations.

State governors began discussing this week how they would gradually ease social-distancing guidelines.

The recent optimism by government leaders and investors does not reflect the pain being felt by businesses which have been forced to lock their doors and turn away customers.

More than 16 million people have filed for unemployment in the past three weeks, as businesses have been forced to shut down to prevent the virus' spread.

The International Monetary Fund said the global economy is almost certainly in a recession, with its chief economist predicting that the downturn will be worse than the global financial crisis a decade ago.

 

 

Meanwhile, Wall Street was moving north as the market waited to hear first-quarter earnings news from major companies and just when exactly Washington and state governors were thinking about reopening the nation.

Stocks moved broadly higher on Wall Street Tuesday as the White House and a number of state governors weigh how to gradually reopen the economy following some signs that the coronavirus pandemic may be levelling off in some of the hardest-hit areas.

Traders also had their eye on Johnson & Johnson, JPMorgan Chase and other big companies issuing their earnings reports for the first three months of the year, giving investors an early peek into how the outbreak is affecting their business.

 

 

The S&P 500 was up 2.8 per cent, recovering all of its losses from a day earlier. The benchmark index surged 12 per cent last week, though it remains about 18 per cent below its all-time high in February.

As the markets brace for first-quarter earnings reports, investors are already anticipating that specific sectors will be telling tales of woe.

Oil companies, airlines, hotels, restaurants, retailers and automakers will report steep losses and issue forecasts for the coming months. Ford Motor, for example, said on Monday that it would lose $A1 billion in the first quarter - not counting some expenses like interest and taxes - down from a $A4 billion profit in the first three months of 2019.

Companies in these sectors are furloughing or laying off employees. It's here that government aid could prove decisive - and executives, speaking on publicly accessible earnings calls, may reveal whether they will apply for assistance from the Treasury Department and the Federal Reserve, and how much.

 

 

Stock markets rose as positive Chinese trade data lifted some of the economic gloom brought on by COVID-19.

Oil prices fell, despite US President Donald Trump claiming that producers were mulling a global daily output cut of 20 million barrels.

The dollar dropped against main rivals, helping to push gold above $1,700 an ounce -- the highest level for more than seven years, according to traders.

"Markets continue to react in an odd way, mostly ignoring all the bad figures that have come their way and focusing on the positives, such as the China figures," said Chris Beauchamp, chief market analyst at IG trading group.

 

 

Asian stock markets kicked off the day with gains after official data showed Chinese exports fell 6.6 per cent and imports slid 0.9 per cent in March on a yearly basis.

But Julian Evans-Pritchard of Capital Economics warned "the worst is still to come" for China's export businesses, with more economic headwinds likely in the months ahead as major trading partners battle their coronavirus outbreaks.

Investors will now await the release of China's quarterly GDP figures on Friday, with forecasters predicting a 6.2 per cent contraction.

Shanghai's main index finished 1.6 per cent higher and Hong Kong returned from a four-day break to close up 0.6 per cent Tuesday.

 

A reflector shows The Chinese national flag flies at half-mast at the Bund to mourn victims of COVID-19 on April 04, 2020 in Shanghai, China. Picture: Getty
A reflector shows The Chinese national flag flies at half-mast at the Bund to mourn victims of COVID-19 on April 04, 2020 in Shanghai, China. Picture: Getty

"The data coming out of China is a rough leading indicator for the rest of the world," noted Jasper Lawler, head of research at London Capital Group.

"The smaller exports drop is a clue that China's first-quarter growth figures released on Friday could also surprise on the topside." After a strong start, European bourses tailed off approaching the half way stage, while London slipped into a slight loss.

Britain's economy could shrink by an unprecedented 13 per cent in 2020 in the case of a three-month coronavirus lockdown, according to a scenario published by UK fiscal watchdog the Office for Budget Responsibility.

Trading was halted in Frankfurt for several hours as the Xetra trading system, on which several European exchanges depend, experienced technical problems.

On the corporate front Tuesday, JPMorgan Chase reported a huge decline in first-quarter earnings after setting aside nearly $8.3 billion for loans vulnerable to the economic devastation from coronavirus shutdowns.

"There is still a lot uncertainty over whether the reduction in output will be enough," said Neil Wilson, chief market analyst at trading website Markets.com "The biggest uncertainty for oil is how quickly does demand recover in the medium term? Indeed, this is the central question for risk assets in general," he added.

Oil producing nations at the weekend thrashed out a compromise to cut output by nearly 10 million barrels per day from May, while Trump said the final figure could end up being double that level.

Oil prices have crashed as the coronavirus outbreak sends demand off a cliff, with a Saudi-Russian price war compounding the crisis.

The outbreak of the coronavirus has dealt a shock to the global economy with unprecedented speed. Following are developments Tuesday related to the global economy, the workplace and the spread of the virus.

Economists are still trying to put into context the shock that the world has absorbed, and will absorb. On Tuesday, the International Monetary Fund put the damage at Great Depression levels.

France is forecasting an 8per cent drop in growth this year and is staring down its worst recession since World War II. And that 8 per cent drop may be optimistic, Finance Minister Bruno Le Maire said.


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