After the deluge: Markets rally as Hurricane Irma is downgraded to a tropical storm. (Reuters: Stephen Yang)
Wall Street’s relief rally on Monday is likely to flow to Australia when the ASX opens its doors for trading.
There are several signs that investors were breathing a collective sigh of relief.
Namely, gold fell by 1.4 per cent from its one-year high as traders retreated from safe-haven assets, and the CBOE volatility index (VIX), which measures anxiety in the market, dropped by 12 per cent to 10.8.
Markets at 7:30am (AEST):
- ASX SPI 200 futures +0.5pc at 5,736, ASX 200 (Monday close) 0.7pc at 5,713
- AUD: 80.26 US cents, 60.95 British pence, 67.12 euro cents, 87.80 Japanese yen, NZ$1.11
- US: Dow Jones +1.2pc 22,057, S&P 500 +1.1pc at 2,488, Nasdaq +1.1pc 6,432
- Europe: FTSE +0.5pc at 7,414, DAX +1.4pc at 12,457, Euro Stoxx 50 +1.4pc at 3,495
- Commodities: Brent crude +0.2pc at $US53.88/barrel, spot gold -1.4pc at $US1,327/ounce, iron ore +0.2pc at $US74.49/tonne
Bullish sentiment is back
The three major indexes finishing sharply higher (by at least 1 per cent each), with the S&P 500 jumping to a fresh record.
The main reason for the surge in US market is that Hurricane Irma was downgraded to a tropical storm. This means the likely damage it caused is not likely to be as expensive as originally feared.
Catastrophe risk modelling firm AIR Worldwide forecast that total insured losses in the United States would range from $US20-40 billion, which is much lower than its initial estimate of $US65 billion.
Furthermore, the market was relieved by the absence of geopolitical headlines concerning North Korea — as its anniversary celebrations on the weekend did not result in another missile test.
After Wall Street closed, the UN Security Council unanimously adopted a US-drafted resolution imposing new sanctions on North Korea.
Every US sector finished higher, with technology and financial stocks being the best performers — up 1.7 and 1.5 per cent respectively.
Apple provided the largest boost to the tech-heavy Nasdaq. Its shares rose almost 2 per cent, ahead of its new iPhone being launched on Wednesday at around 3.00am (AEST).
As risk-aversion subsided in the market, the US dollar recovered. This led to the Australian dollar falling by 0.4 per cent against the Greenback.
ASX SPI futures have risen by almost half a per cent, which is normally indicative of a higher open for the Australian share market.
In local economic news, NAB will release the results of its monthly business survey (for the month of August).
“No hints here as usual,” said NAB economist Tapas Strickland.
“Markets will be interested in the extent to which Business Conditions and the Employment sub-index have sustained their recent improvements — and whether Business Confidence and Consumer Confidence continue to diverge.”
While business conditions reached their highest level in nine years (since the global financial crisis), consumer sentiment was negative for the ninth straight month.
It will be interesting to compare today’s NAB business survey results with tomorrow’s Westpac consumer sentiment survey.