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Morning Market Wrap: US equities close the trading session higher

26 Jun 2020
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US equities markets bounced back on Thursday following sharp falls the prior session.

US equity markets closed higher on Thursday, despite economic data showing that the US economy shrank at an annualised rate of 5% for the March quarter. Markets were buoyed by the announcement that regulations for US banks were to be pared back, in an effort to allow them to free up additional capital. Wells Fargo (WFC: +4.8%), JP Morgan (JPM: +3.5%), and Goldman Sachs (GS: +4.6%) all rallied strongly as a result.

Looking at the performance of the broader indices, and the S&P500 rallied 1.1% to close at 3083.76, while the Nasdaq100 gained 0.99% to close at 10,101.80. Tech stocks continue to outperform the broader market, with the Nasdaq100 having completely retraced the February to March decline, while the S&P500 remains approximately 10% below the February peak of 3393.52.

To the Australian share market, and after trading sideways in a narrow range for over a week, the ASX200 sold off heavily on Thursday, declining 2.48% to close at 5817.68. From a technical perspective, the current uptrend remains in place while ever the price remains above the June low of 5719. Put another way, it would take a break of this support level to suggest a deeper correction was underway.

In Australian stock news, it appears that the fate of Virgin Australia (VAH) may finally be known, with Bain Capital poised to sign a deal to acquire the company. Considering Bain is a private equity company, this would see Virgin delisted from the ASX. Continuing with the airline industry, and Qantas (QAN), who is currently a holding in our Blue Chip portfolio, has successfully completed the institutional component of its recently announced capital raising with a placement of shares at $3.65, raising $1.36 billion. Retail investors will also be given the opportunity to acquire more stock under a $500m share purchase plan. Qantas has also announced 6000 job cuts in an effort to cut costs and reduce the cash burn while air travel remains largely grounded due to the Covid-19 pandemic.

*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.

To commodity markets, and global oil prices were firmer, following the announcement that Russia will cut exports of its Urals grade crude oil by 40% to around 785,000 barrels a day. As a result, the WTI Crude oil price gained 1.9% to close at US$38.72 a barrel. Spot gold prices were slightly weaker, yet prices remain above prior resistance at US$1750, meaning the uptrend remains in place for now. The Australian dollar continues to hover just below the US$0.70 level, closing on Thursday at US$0.6887.

 

This article was written by Oliver Gordon – Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected]u or by phoning +612 8302 3623.

Rivkin does not ever provide financial advice. Please consider your own circumstances before purchasing any of our products or acting on our general advice, for any Rivkin product or recommendation.

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