US stocks extend rally on the back of rate-cut hopes

Stock Markets

Australian shares are poised to open higher today after US stocks gained overnight as market sentiment was bolstered by a potential interest rate-cut from the Federal Reserve. Federal Reserve Chairman Jerome Powell's comments made during a central bank symposium on Tuesday sparked the two-day rally, though gains in stocks were limited by a weak US private payrolls report and falling oil prices. The US private payrolls report indicated that private employers added jobs in May at the slowest pace in nearly a decade and reinforcing the need for a rate-cut ahead of Friday's key US non-farm payrolls report. The US and Mexico failed to reach a deal on immigration issues during their Wednesday meeting. US President Donald Trump tweeted that "progress is being made, but not nearly enough" and added that talks will continue on Thursday with tariffs scheduled to come into effect on Monday if no deal is reached. Australian GDP figures released yesterday showed that the economy grew at 0.4% in the first three months of the year and has grown by 1.8% over the last twelve months. The result fell slightly below market expectations and was dragged down by weak household spending.

Wall Street's major indexes closed higher overnight as stocks continued to rally on hopes of a rate-cut in the near future. The Dow Jones, S&P 500 and Nasdaq gained 207.39 (+0.82%), 22.88 (+0.82%) and 48.358 (+0.64%) points respectively.

The benchmark S&P/ASX200 index closed 26.158 (+0.41%) points higher on Wednesday. The index was lifted by strong performance in the information technology and financial sectors which were up 2.08% and 1.19% respectively.

ASX 200 futures are currently up 21 points.

Today's data releases:  European Central Bank policy meeting; Germany factory orders April; US trade balance April.

Commodities and Currencies

Oil prices plunged on Wednesday, with futures falling to their lowest since January, after the US government reported an unexpected surge in the nation's crude stockpiles. WTI and Brent crude are currently sitting at US$51.38 (-0.58%) and US$60.63 (-2.16%) per barrel respectively.

Iron ore prices are currently flat at US$100.38 a tonne.

The spot price of gold is currently down 0.56% at US$1332.95 an ounce.

The AUD is currently down 0.03% at US69.68¢.

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.