ASX to open higher as markets remain unperturbed by US volatility

By Trevor Hoey. Published at Jun 2, 2020, in Market Wrap

A measured response by President Trump regarding US-China relations eased tensions, resulting in a good all round performance from equities markets on Monday.

The news even took the sting out of the China-Hong Kong feud, resulting in the Hang Seng recording a 771 point gain, up 3.3% to 23,732 points.

It could be argued that this provided some stability in Australia, turning the attention from rioting and looting in the US to promising commodity price movements and domestic issues.

The S&P/ASX 200 index (XJO) increased 63 points or 1.1% to close at 5819 points with mining and building materials groups leading the index higher.

A rampaging iron ore price drove the miners higher, while expectations of government stimulus for the construction sector resulted in strong gains by building materials companies such as Boral (ASX:BLD) and Adelaide Brighton (ASX: ABC).

The government is expected to shortly announce details regarding a grant for those buying new homes.

Despite the imminent release of data indicating Australia is officially in recession, it appears that investors have already factored this in and are taking a forward-looking approach.

The ASX SPI200 Futures index is up 9 points to 5837 points.

24 hours

Elsewhere in Asia, the Nikkei 225 rallied 184 points or 0.8% to close at 22,062 points, while the Shanghai Composite surged 2.2%, closing at 2915 points.

UK investors followed the strong lead from the Asia-Pacific region with the FTSE 100 up 1.5% or 90 points to 6166 points.

The CAC 40 followed suit, gaining 1.4% to close at 4762 points.

The DAX was closed for Germany’s Whit Monday public holiday.

Wall Street rallied while half the country was on fire and the US president was hiding in his White House bunker.

Travel, financial and oil stocks drove a 91 point increase in the Dow as it closed at 25,475 points.

The S&P 500 gained 0.4% to close at 3055 points.

The NASDAQ continued to outperform the other indices, gaining 0.7% or 62 points to close at 9552 points, now less than 3% shy of its all-time high.

There was little movement in the CBOE Volatility Index as it stayed below 30 points.

On the commodities front, gold continues to hover in the vicinity of US$1750 per ounce.

The Brent Oil Continuous Contract built on last week’s gains to hit US$38.68 per barrel, up 100% in less than six weeks.

Iron ore has taken a breather, but is still holding just above US$100 per tonne.

Base metals are back in favour with copper pushing up above the US$2.45 per pound mark to close in on mid-March levels.

Nickel recorded its third successive day of gains, having increased from US$5.47 per pound to US$5.63 per pound.

Zinc has stacked on 5% in two days, threatening to push past the peak of about US$0.92 per pound registered on May 20 prior to a sharp retracement, which would then see it back at February levels.

The Australian dollar continued to strengthen against the US dollar, now fetching US$0.68 for the first time since January, for a 10 week gain of nearly 20%.


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