ASX set to rise on positive overseas sentiment and an uptick in commodity prices

By Trevor Hoey. Published at May 19, 2020, in Market Wrap

We suggested yesterday that it could be another good day for the miners, and they were largely instrumental in driving the S&P/ASX 200 (XJO) up 55 points or 1% to 5460 points.

After intense volatility last week, the index is now up more than 200 points in May, suggesting positive sentiment could be returning.

The ASX SPI200 futures indicates our market is set to extend those gains again today, up 109 points to 5593 points.

With strong leads from overseas including a gain of more than 900 points in the Dow overnight this looks to be on the mark.

24 hours

Looking across the time zones, Asian markets were solid yesterday without experiencing the same gains as we saw on the ASX.

The Nikkei 225 increased 0.5% or 96 points to close at 20,133 points. The Hang Seng gained 0.6% or 137 points, closing at 23,934 points. The Shanghai Composite was up marginally, gaining seven points to close at 2875 points.

It was UK and mainland European markets that led the charge as evidence of a slowing in new coronavirus cases emerged.

An increase of more than 10% in crude oil futures also had a positive impact on markets in that region.

The FTSE 100 surged 4.3% or nearly 250 points to 6048 points, its highest close since April 29.

The German DAX was the star performer gaining nearly 600 points to close at 11,058 points, an increase of 5.7%. The CAC 40 wasn’t far behind, soaring 5.2% or 220 points to close just shy of 4500 points.

US markets started the day strongly, up about 400 points, and momentum built throughout the afternoon.

In fact, if it wasn’t for some late profit-taking in the last 30 minutes the index would have stacked on more than 1000 points.

The close of 24,597 points represented an increase of 3.8%, and it is the second highest close since the index fell below the 25,000 point mark on March 10.

The S&P 500 rallied 3.1% to close at 2953 points.

The NASDAQ was a little more subdued gaining 2.4% or 220 points, closing at 9234 points.

However, it needs to be remembered that the NASDAQ has been outperforming the Dow and it has been quite resilient during prolonged periods of volatility.

Looking at the NASDAQ from another perspective, this was the index’s highest close since February 21, and two days prior to that the index hit an all-time high of 9838 points.

The CBOE Volatility Index (VIX) plunged 8% to 29.3 points.

On the commodities front, gold lost its safe haven appeal, falling from about US$1770 an ounce to close at US$1735 per ounce.

The Brent Crude Oil Continuous Contract continued its upward trend closing just shy of its day high of US$35.72 per barrel, up from about US$29 per barrel last Thursday.

However, the big news surrounds iron ore as it stacked on more than 3% to close in the vicinity of US$97 per tonne.

Most base metals gained ground with copper hitting a 60 day high of US$2.40 per pound.

Lead gained roughly 3%, while zinc went close to matching last week’s 60 day high.

Nickel was up approximately 3% to US$5.51 per pound.

The Australian dollar has gained considerable ground since last week, increasing from US$0.64 to more than US$0.65.

Strength in commodities markets is likely to result in further strong share price gains for our miners, a feature of the last two trading days.


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