Aussie stocks were set to open higher following a tech-led rebound on Wall Street after President Joe Biden ruled out fresh lockdowns or travel restrictions to contain the Omicron Covid variant.
The Nasdaq bounced almost 1.9 per cent as investors snapped up pandemic-proof Big Tech. The Dow and S&P 500 also advanced.
ASX futures climbed 41 points or 0.57 per cent, signalling early relief for Australian investors following two wild sessions that drove the market down almost 230 points before a partial recovery yesterday.
Wall Street
US stocks rallied strongly after ‘Uncle Joe’ damped down fears of another economically-damaging round of pandemic restrictions. The president said there would be no “shutdowns or lockdowns”.
“We’ll fight this variant with scientific and knowledgeable actions and speed, not chaos and confusion,” he said in a televised address.
The S&P 500 bounced 61 points or 1.32 per cent. The Dow Jones Industrial Average gained 236 points or 0.68 per cent. The Nasdaq Composite put on 291 points or 1.88 per cent.
Biden said he will unveil a more detailed winter strategy for dealing with Covid on Thursday. He cited “widespread vaccinations, boosters, testing” among the administration’s tools for tackling the latest outbreak.
US stocks cratered on Friday as news of the new variant broke. The Dow collapsed 2.53 per cent or almost 1,000 points. The S&P 500 and Nasdaq shed more than 2.2 per cent. European markets lost up to 5 per cent.
Markets recovered overnight amid suggestions the new variant may not be as dangerous as first feared. Doctors in South Africa have said the virus produces milder symptoms than earlier variants.
“While it is too early to have definitive data, early reported data suggest that the Omicron virus causes ‘mild to moderate’ symptoms (less severity) and is more transmissible,” Bill Ackman of Pershing Square Capital Management said. “If this turns out to be true, this is bullish not bearish for markets.”
Wall Street’s fear gauge, the VIX, eased 22.6 per cent from Friday’s six-month peak. European markets mounted a tentative recovery. The pan-European Stoxx 600 gained 0.69 per cent. Germany’s DAX edged up 0.16 per cent.
In the US, investors hedged by buying tech giants that weathered last year’s pandemic storm best. Tesla, Amazon, Apple and Microsoft were among prominent gains.
“People are looking at it as a little bit of a sale on Friday and an opportunity to get into some areas of the market that got hit hard,” Robert Pavlik, senior portfolio manager at Dakota Wealth Management, told Reuters.
Travel stocks were mixed. The S&P 500 airlines index eased 0.27 per cent. Leading hotel groups and cruise companies edged higher. Casino groups with operations in Macau sank in the wake of arrests relating to money laundering and cross-border gambling.
Australian outlook
Relief ahead amid signs the market is already starting to discount the likely impact of Omicron. American investors went shopping, but had a bet each way by leaning towards sectors that will fare best if the new variant did become a major headwind.
The three “tech-heaviest” sectors (technology, consumer discretionary and communication services) gained between 1.1 and 2.6 per cent. Defensive sectors also outperformed: utilities +1.56 per cent, real estate +1.33 per cent.
Cyclical sectors advanced, but gains were more restrained: industrials +0.24 per cent, financials +0.31 per cent and materials +0.49 per cent.
Today’s ASX outlook is mildly complicated by the usual end-of-month shenanigans. The first and last sessions of each month generally see heightened volatility as professional investors rebalance portfolios. That makes today’s outcome less certain than would otherwise be the case.
The S&P/ASX 200 is on track for a third straight losing month for the first time in three years. The original pandemic crash last year was over in two months. Investors have since enjoyed an armchair ride, watching their investments recover on 16 of 17 subsequent months until September.
A slew of economic data due today may have an impact as the Omicron panic subsides. Reports on building approvals, the national current account and private-sector credit are due at 11.30 am AEDT. China releases monthly manufacturing and services-sector reports at 12 pm.
Orocobre, Starpharma Holdings and Omni Bridgeway hold annual general meetings today.
IPOs: Biome Australia lists at 10.30 am AEDT. Biome develops “live biotherapeutic products” and food supplements for the sports and wellness communities. Winsome Resources follows at 12.30 pm. Winsome is a lithium explorer with projects in Quebec.
The dollar eased 0.16 per cent overnight to 71.31 US cents.
Commodities
BHP and Rio Tinto rallied in overseas trade after Brazilian giant Vale downgraded its iron ore production outlook. Overnight. the Australians’ chief overseas competitor told investors it expects to hit the lower end of this year’s guidance and produce 320-335 million tonnes next year – less than the 346 million anticipated by analysts.
BHP’s US-listed stock bounced 2.79 per cent. Its UK-listed stock added 2.91 per cent. Rio Tinto put on 1.01 per cent in the US and 1.74 per cent in the UK. The spot price for iron ore landed in China rose US$3.30 or 3.4 per cent to US$99.95 a tonne.
Oil clawed back a fraction of Friday’s heavy loss, but gains were restrained by this week’s OPEC+ meeting. Brent crude settled 72 US cents or 1 per cent ahead at US$73.44 a barrel. The international benchmark crashed 11.63 per cent on Friday from above US$80 a barrel.
“The big market signal this week will come from how OPEC+ decides to respond to the threat of the omicron variant,” Louise Dickson, senior oil markets analyst at Rystad Energy, said.
Natural gas futures reversed Friday’s 7 per cent rally, skidding 11.4 per cent in the US to US$4.854 per million British thermal units.
Gold remained mired below US$1,800 an ounce amid limited interest in havens. Metal for February delivery settled US$2.90 or 0.2 per cent lower at US$1,785.20 an ounce. The NYSE Arca Gold Bugs Index drifted down 0.14 per cent.
Copper regained some of Friday’s loss. March copper bounced 1.2 per cent to US$4.341 a pound on Comex. On Friday, the industrial metal sank 3.9 per cent.