The S&P500 staged a strong comeback overnight as investors buy the dip showing a strong sign that the uptrend will continue. Crude did not join in the rebound holding around 66.75 US a barrel. Financials saw the biggest gains overnight up 2.42%.
Long term yields fell hard again overnight seeing the US 10 year yields back to 1.13 but a large reversal saw them close at 1.22. Watch this space for a sign of money flowing back to equities. We also did not see much movement in the AUD overnight which has fallen strongly over the past month. Metals were mainly up, but continue to edge sideways at current levels.
The main thing to watch now is whether the daily cases in the US continues to get worse and they put new restrictions on. Also, any talks around inflation and or central bank policy.
Locally with VIC and NSW the lockdowns we have around half of the Australian population locked down. This is also weighing on sentiment. Markets though are unlikely to sell off too much as we have enough Aid measures to stop the local economy from spiraling out of control.
The XJO is expected to rally on open this morning following strong leads from both the U.S session last night and their positive futures this morning.
We are expected to open near 7,300, which has been a sticking point in the recent trading range between roughly 7,250 and 7350. Our market, despite what has occurred overseas, has been reluctant to move too far away from this level. As of late though, prior to the past few sessions of falls, it seemed the sentiment was shifting to the upside. This was just tested and was not found wanting, and so the resurgence overnight should have the bulls come back into the market in full flight.
consolidation range at 7,350. In the medium term we would expect this level to break. It would be reasonable to assume that because the recent falls were attributed to spread of the virus and subsequent lockdowns, then the past remedy of stimulus will continue to be applied. Locally, this could mean the re-implementation of JobKeeper.
US shares pushed strongly higher overnight, with the S&P 500 index enjoying its biggest daily gain since March. Overall it appeared that investors were happy to shake off concerns around a third wave of the virus and focus on the strong stimulus and positive economy.
Overnight we saw US building permits, which were slightly lower than expected, though housing starts were higher than expected. Company earnings reporting continues to be strong, though Netflix slightly missed its earnings expectations when it reported after market, this wasn’t enough to send it lower in after-market trading however. Every major sector closed higher overnight, except for consumer staples, which closed flat. The strongest gains came from the Industrials, Financials, and Real Estate sectors.
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