Wall Street’s record surge, Aussie markets follow suit as US close to rescue deal
The ASX jumped back above 5000 points this morning following the lead from the US where stocks soared in Dow’s biggest one day percentage gain since 1933.
The CBA has forecast stronger growth (Photo: EPA/JUSTIN LANE)
The jump in the US was sparked by claims that Congress was close to signing off on an economic rescue package.
In Australia, the big gains at the open of trade lost some puff but the ASX 200 was still up by 174 points by mid morning.
Big gains were made by Qantas after it secured debt financing of $1.05 billion against its aircraft to aid liquidity. Its shares were up 23 per cent after the announcement.
Wesfarmers also announced it would close 25 of its stores in New Zealand and its 53 NZ Bunnings outlets would be closed to the public but remain open for trades. Its shares jumped 52 cents in mid-morning trade.
Domino’s shares went against the trend, falling almost 6 per cent in morning trade after it said it stores in New Zealand would close for at least four weeks.
Domino’s management said it was responding to quickly implement new operational methods including changes to transition to more delivery orders and reduce cash payments through its zero contact strategy.
“Domino’s is observing an increase in delivery orders and is hiring more drivers in all regions,” it said.
Afterpay was also among the big winners with a continuation its share resurgence with a 25 per cent jump.
Brisbane-based Vita Group said it temporarily close its network of aesthetic clinics within its Skin-Health and Wellness (SHAW) channel.
It said its 21 clinics, including 13 Artisan branded and eight non-Artisan branded clinics, will be closed from Thursday for an indefinite period.
Impacts arising from this decision were being assessed.
The rise in the Australian market appeared to shrug off claims that downturn in the economy would be worse than the global financial crisis.
Westpac also predicted a Budget deficit of $90 billion for 2019-20, widening to $160 billion for 2020-21 after which the federal debt would soar to $820 billion, or 40 per cent of GDP.
In the US all three main US stock indexes rebounded strongly from Monday’s brutal selloff as the coronavirus outbreak forced entire nations to shut down.
Senior Democrats and Republicans said on Tuesday they were close to a deal on a $US2 trillion ($A3.4 trillion) stimulus bill, aimed at providing financial aid to Americans out of work and help for distressed industries, injecting optimism following the biggest sell-off since the financial crisis.
The expected legislative measure adds to aggressive action announced by the Federal Reserve in recent days, including the purchase of corporate bonds and announcing that the US central bank will make direct loans to companies.
King Lip, chief investment strategist at Baker Avenue Asset Management in San Francisco, said expectations on the stimulus bill were driving optimism on Wall Street, but he said his firm was still waiting to buy back into the market.
“With all of this stimulus, we just need a catalyst to spark the fire,” Lip said. “That spark will be a peaking of the cases, and when it starts to come down, I think that’s when everything gets lit up.”
Investors were also pleased after President Donald Trump said on Monday that he was considering how to restart parts of business life when a 15-day shutdown ends next week, even as the highly contagious virus spreads rapidly and poorly equipped hospitals struggle with a wave of deadly cases.
A separate proposal in the US House of Representatives to grant airlines and contractors a $US40 billion ($A67 billion) bailout lifted the S&P 1500 airlines index by 15 per cent.
The severity of the spread of COVID-19 and the expectations of aggressive stimulus measures have whipsawed financial markets and ended an 11-year bull market.
Boeing Co powered the Dow’s gains, jumping nearly 21 per cent after chief executive Dave Calhoun said the plane maker expected the 737 MAX jet to return to service by mid-year. Its shares have lost nearly two-thirds of their value so far in 2020.
Data on Monday showed US business activity hit a record low in March, bolstering expert views that the economy was already in a recession.
Traders were still weighing the uncertainty of the path of the coronavirus outbreak.
“We don’t know how long it’s going to take to peak. We don’t know how to treat it. We don’t have a vaccine. So all of those uncertainties are causing a myriad of aftershocks,” said Nancy Perez, senior portfolio manager at Boston Private Wealth in Miami.
The Dow Jones Industrial Average soared 11.37 per cent to end at 20,704.91 points, while the S&P 500 jumped 9.38 per cent to 2447.33. The Nasdaq Composite rallied 8.12 per cent to 7417.86.