Share prices are set to decline when trading begins today after the Australian stock market posted its best month on record last month.
The SPI 200 futures contract was down 123 points, or 2.22 per cent, at 5417 points at 7am in Sydney.
US stocks lost ground overnight as grim economic data and mixed earnings prompted investors to take profits at the close of the S&P 500’s best month in 33 years. Unemployment claims topped 30 million and consumer spending has plummeted, while Amazon’s forecast of COVID-19 costs wiping out its profits shocked traders.
The S&P 500 fell 0.9 per cent, after its biggest monthly gain of 12.7 per cent since 1987.
Looking at the home front, property price data for April is due to be published today. It may show whether home values were hit by the social distancing restrictions to slow the coronavirus.
The benchmark S&P/ASX 200 surged 129.0 points, or 2.4 per cent, to finish at 5522.4 on Thursday. Having dropped by the most on record in March, at 8.8 per cent, the ASX’s 23.3 per cent gain in April was the largest on record.
The new month on the ASX is set to start on a down note after April’s record surge.Credit:AAP
1. Risk-on rally fizzles: The risk-rally fizzled in European and US trade overnight, with the volatility index VIX creeping higher very slightly once more to 34, as stock indices pared a portion of the week’s gains. The news flow was negative, and there was lacking any eye-catching good news stories to provide traders with another excuse to buy into risk. At that, after a ripping month for stock markets, a finger or two was being pointed at end-of-month profit taking as one reason why the pullback took place.
2. Global stocks drop after solid month: For the multitude of factors weighing on equity markets, it proved a soft end to a strong month of April. The S&P500 shed 0.92 per cent, led by a drop in materials and financials stocks; but rallied by over 12 per cent for the month, in what marked the strongest one month performance for the US stock market since 1987. US energy stocks also fell, despite another spike in oil prices. In European trade overnight, a spate of dour macro-economic news saw Germany’s DAX fall 2.22 per cent, and London’s FTSE100 shed 3.5 per cent.
3. Apple and Amazon underwhelm: This morning’s earnings will likely prove a small head-wind for US stocks heading into the final day of the trading week. After a strong showing earlier in the week from some of Wall Street’s mega-cap tech-firms, Apple and Amazon inspired a touch less bullishness with their results. Apple did beat revenue estimates and increased its dividend marginally, but failed to deliver any guidance for the future to the market. While Amazon’s results came broadly in-line with expectations, it flagged a future hit to profits from higher expenses related to the COVID-19 pandemic.
4. Currency markets driven by risk-off, end-of-month trading: An anti-risk, end-of-month trading dynamic can be said to have driven currency markets. Profit taking across high-beta currencies was reported to be widespread, driving the Aussie dollar back down into the low 65 US cent handle, with the local currency also finding itself sold due to the generally risk-off tone to the day’s trade. The US dollar weakened despite the on-balance bearish day’s trade, as traders unwound their hedges and bought back into the euro and yen.
5. Euro climbs, despite poor data: The euro was the noteworthy and surprise outperformer. It leapt 0.7 per cent to trade at roughly $US1.0950, even in light of was some poor fundamental data overnight. A series of European GDP figures were published overnight, with the continent-wide figure showing a contraction in growth of 3.8 per cent last quarter. The ECB also met, and announced a cut to the funding cost of banks, with President Christine Lagarde flagging that Eurozone GDP could contract by as much 12 per cent this year.
6. US data disappoints: US economic data also underwhelmed overnight, after the week’s US jobless claims data exceeded estimates and showed another 3.8 million Americans applied for benefits last week. It takes the 6-week total of claims made to more than 30 million. The collection of negative data weighed on bond yields, especially around the “belly” of the yield curve, and particularly in safe-haven European sovereign bonds. Despite the drop in yields, gold prices fell overnight, shedding roughly 1.7 per cent.
7. ASX200 to drop at open: It’s the final day of the week, but a new month, with SPI Futures suggesting the ASX200 ought to kick off May with quite a considerable 123 point drop this morning. This follows a very strong day for the ASX200 on Thursday, in which the index rallied 2.39 per cent. The rally pushed the ASX200 to what was its best single month performance in its history – though, of course, this stat needs to come with the caveat that it follows its worst single month performance in March.
8. Market watch:
ASX futures down 123 points or 2.2% to 5417 at 7am AEST
- AUD -0.7% to 65.13 US cents
- On Wall St: Dow -1.2% S&P 500 -0.9% Nasdaq -0.3%
- In New York: BHP -3.4% Rio -5.5% Atlassian +1.8%
- In Europe: Stoxx 50 -2.3% FTSE -3.5% CAC -2.1% DAX -2.2%
- Spot gold -1.7% to $US1683.55 an ounce at 2.51pm New York time
- Brent crude +12.6% to $US25.39 a barrel
- US oil +24.6% to $US18.76 a barrel
- Iron ore +1.9% to $US84.04 a tonne
- Dalian iron ore +2.5% to 610 yuan
- LME aluminium -1.1% to $US1489.50 a tonne
- LME copper -1.3% to $US5196 a tonne
- 2-year yield: US 0.20% Australia 0.20%
- 5-year yield: US 0.36% Australia 0.41%
- 10-year yield: US 0.64% Australia 0.88% Germany -0.59%
- US prices as of 4.59pm New York time
This column was produced in commercial partnership between The Sydney Morning Herald, The Age and IG
Information is of a general nature only.
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