US markets surge on Fed's openness to rate cuts amid global growth uncertainty

Stock Markets

Australian shares are poised to open higher today as US stocks surged on the back of comments from Fed Chairman Jerome Powell, where he indicated a greater openness to rate cuts amid heightened global growth uncertainty. China's Commerce Ministry said trade differences between the two powerhouse economies should be resolved through dialogue; the comments raised investor optimism that the US and China will be able continue with the ongoing negotiations. Republican lawmakers are discussing whether they may have to block the new tariffs on Mexican imports threatened by US President Donald Trump. Yesterday saw the RBA cutting the interest rate for the first time since 2016, taking the cash rate to a record low of 1.25%. In a speech on Tuesday explaining the central banks' decision, RBA Governor Phillip Lowe signalled the possibility to future rate cuts and suggested a cash rate of 1% by the end of the year.

Wall Street's major indexes closed higher overnight on signs the Federal Reserve is considering a rate cut. The Dow Jones, S&P 500 and Nasdaq gained 512.4 (+2.06%), 58.82 (+2.14%) and 194.098 (+2.65%) points respectively.

The benchmark S&P/ASX200 index closed 11.813 (+0.19%) points higher on Tuesday with headline news of the RBA's decision to cut the official cash rate lifting the index.

ASX 200 futures are currently up 53 points.

Today's data releases:  AiG performance of services May, GDP first quarter, RBA's Heath speaks; China Caixin services PMI May; Japan Nikkei services PMI May; Euro zone Markit services PMI May, PPI April, Retail sales April; UK services PMI May; US ADP employment data May, Markit services PMI May, ISM nonmanufacturing May, Fed's Beige Book, Fed's Clarida speaks

Commodities & Currencies

Oil prices rebounded on Tuesday following positive comments from Fed Chairman Jerome Powell as he raised expectations for a cut in interest rates which subsequently caused rally in global stock markets. WTI and Brent crude are currently sitting at US$53.0 (-0.90%) and US$61.97 (+1.13%) per barrel respectively.

Iron ore prices are currently up 1.3% at US$100.38 a tonne.

The spot price of gold is currently down 0.01% at US$1325.12 an ounce.

The AUD is currently down 0.01% at US69.90¢.

This article was written by Mithun Fernando – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via mithun.fernando@rivkin.com.au or by phoning +612 8302 3633.