Futures down, gold closes in on all-time high, oil up more than 2%

By Trevor Hoey. Published at Jul 22, 2020, in Market Wrap

Unperturbed by the rapid uptick in coronavirus cases, the S&P/ASX 200 surged 2.6% or 155 points to close at 6156 points on Tuesday as the market responded positively to the government’s decision to extend support payments through to March 2021.

Providing a further buffer has been an extension of the bank’s loan deferral measures beyond September.

It was mainly tech and healthcare stocks that drove the index higher with blue chips like CSL, Cochlear and Sonic Healthcare making strong gains.

In the IT sector, it was once again Afterpay that led the way, gaining about 8%. Its share price has now increased more than seven-fold in four months.

However, the ASX SPI200 futures index is pointing to some money being taken off the table after yesterday’s strong performance, down 65 points to 6073 points.

Notwithstanding this gloomy outlook, gold stocks could once again be the exception with the precious metal hitting new long-term highs overnight.

There were also robust gains in oil, base metal and iron ore prices.

24 hours

Similar to Australia, most other Asia-Pacific markets were in full flight yesterday, although recent strong gains in the Shanghai Composite tempered its performance as it only gained 0.2% to close at 3320 points.

The Hang Seng was the star performer gaining 2.3% or 577 points to 25,635 points.

There was also a strong performance from the Nikkei 225 as it rallied 166 points to close at 22,884 points.

While gains in the European region were more measured, there was still a very positive tone with the DAX gaining 1% or 125 points as it closed at 13,171 points after hitting a high of 13,314 points.

This is the first time since February it has closed above 13,000 points, and the index is now within striking distance of its all-time high.

The CAC 40 gained 11 points to close at 5104 points.

The FTSE 100 surged in early morning trading, hitting a high of 6315 points, but there was a raft of selling late in the day, resulting in the index only gaining eight points as it closed at 6270 points.

As has often been the case recently, there was a disconnect between the Dow and the NASDAQ with the former gaining 0.6% or 160 points to close at 26,840 points.

While the NASDAQ shed 86 points or 0.8%, closing at 10,680 points, it needs to be taken into account that the index has gained more than 300 points in the last three trading days, resulting in it hitting an all-time high on Monday.

The S&P 500 was relatively flat, increasing five points to 3257 points.

On the commodities front, a strong increase in the Brent Crude Oil Continuous Contract could result in robust support for energy stocks today.

It increased more than 2% from just above US$43 per barrel at the start of the day to hit a high of US$44.89 per barrel before closing at US$44.32 per barrel.

Once again, it was gold that stole the headlines as the precious metal surged about US$26 per ounce to close at US$1843 per ounce.

To put this in perspective there has only been one occasion in mid-trading that the gold price has ever broken through US$1900 per ounce and that was in August 2011 - on that day it closed at US$1880 per ounce, just US$37 per ounce above last night’s close.

Analysts at Citi believe there is potentially more upside to come with Bloomberg quoting their analysts as forecasting a 30% probability that gold will top $2000 an ounce in the next 3 to 5 months.

An increase in investment in safe haven assets, combined with the likelihood of an easing in monetary policy in order to cushion and stimulate the economy are viewed as potential catalysts.

Elsewhere, iron ore made strong gains, up 1.7% to US$111 per tonne.

Base metals were also back in favour with copper revisiting last week’s long-term high of nearly US$3.00 per pound.

There was a strong surge in the nickel price as it passed the US$6.00 per pound mark to close at US$6.10 per pound, a 6 month high.

Zinc broke through the US$1.00 per pound mark to notch up a five month high.

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