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Strength in overseas markets and kick in oil price drives futures higher

Strength in overseas markets and kick in oil price drives futures higher
Much of yesterday’s gains were on the back of optimistic expectations regarding tonight’s budget which is expected to provide tax cuts, cash injections and stimulus packages for consumers and businesses.
Oct 06, 2020

The S&P/ASX 200 index (XJO) soared 150 points or 2.6% as it turned around all of Friday’s losses, as well as adding another 70 points.

 

The financial sector which has a strong index weighting given that it includes the four big banks and other large financial institutions had a significant impact on the rebound.

 

The four big banks were all up by about 4%, and Macquarie Group surged 3%.

 

Our big miners such as BHP and Rio Tinto added further momentum, assisted by oil stocks which rebounded after being hammered on Friday.

 

Oil Search, Beach Energy and Santos were up by 7.5%, 5.6% and 4.7% respectively, while energy services group Worley gained nearly 6%.

 

The ASX SPI200 futures index suggests this positive momentum will continue on Tuesday as it is up 28 points to 5954 points.

 

Given the strength in equities markets overnight and the strong performance from key commodities such as oil and gold, this could be on the cards.

 

However, bear in mind that much of yesterday’s gains were on the back of optimistic expectations regarding tonight’s budget which is expected to provide tax cuts, cash injections and stimulus packages for consumers and businesses.

 

The adage, ‘’buy the rumour, sell the fact’’ could come into play though as investors mull over the real numbers that may not be supportive of such a significant rerating.

 

NASDAQ surges while Trump does laps in Maryland

 

As Trump orchestrated a bizarre COVID convoy around his hospital digs in Maryland, US markets rallied strongly with the Dow up 465 points or 1.7% as it closed at 28,148 points.

 

However, once again it was the NASDAQ that shone brightest, gaining 2.3% or 257 points to close at 11,382 points, just shy of its session high.

 

While the mood wasn’t as bullish in Europe, all the major markets were in the black and the broader Stoxx 600 closed up 0.8%.

 

The FTSE 100 rallied 40 points or 0.7% to close at 5943 points.

 

Markets in Germany and France both gained about 1% to close at 12,828 points and 4871 points respectively.

 

This was a credible performance, particularly in light of heightening coronavirus fears, including misinformation regarding case numbers in the UK.

 

On the commodities front, oil was the standout performer with the Brent Crude Oil Continuous Contract gaining 5% to close at US$41.29 per barrel.

 

On the back of this development, solid gains were made by producers such as Chevron Corp and services group Caterpillar Inc.

 

Gold continued its rally, and it is now hovering in the vicinity of US$1920 per ounce, having gained more than US$50 per ounce in the last 10 days.

 

Among the base metals, copper and lead trended lower while zinc made a slight gain, breaking a four-day losing streak.

However, nickel was the big mover, increasing from US$6.47 per pound to US$6.56 per pound.

 

The Australian dollar strengthened overnight as it pushed up towards US$0.72.

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European markets slip on further Covid restrictions

The FTSE remains down following the UK government announcing further stricter regional lockdown measures, this time in the Greater Manchester.

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