Australian shares are expected to start the day higher as US technology stocks rebounded overnight, lifting the Nasdaq to a three-month high.
Key points:
- Oil prices have jumped 25pc since the year began, despite today’s fall
- The Australian dollar has dropped 9pc (since its high point of 76.6 US cents in April)
- US companies have, generally, been reporting higher-than-expected earnings
ASX futures were up 0.5 per cent, to 6,913 points, by 7:50am AEST.
The Australian dollar was trading at 69.5 US cents, after a 0.5 per cent rise overnight.
Wall Street’s main indexes rebounded, after dropping for the past two days.
The Nasdaq jumped 2.6 per cent, to 12,668 points, its highest level since early May, and the S&P 500 climbed 1.6 per cent, to end the session at 4,155, while the Dow Jones index rose 1.3 per cent, to 32,813.
Spot gold rose 0.2 per cent, to $US1,763.10 an ounce.
Meanwhile, oil prices fell sharply, with Brent crude futures down 3.4 per cent, to $US97.10 a barrel.
It comes after the OPEC+ group of oil-producing nations, including Saudi Arabia and Russia, announced that it would increase its supply by a mere 100,000 barrels per day.
On top of that, a new report from the Energy Information Administration showed an unexpected surge in US crude and gasoline stocks.
“Oil is still up 25 per cent from the beginning of the year,” said Oliver Pursche, senior vice president at Wealthspire Advisors in New York
“This recent drop is a combined result of that and a reflection that there is going to be an economic slowdown. The market is trying to find equilibrium.”
Stronger-than-expected earnings
Investor sentiment was also boosted by strong earnings reports from PayPal, CVS Health Corp and other companies.
Financial results — which the market’s low expectations — have helped US markets rebound from losses caused by worries about decades-high inflation, rising interest rates and shrinking economic output.
Apple and Amazon rallied almost 4 per cent, while Facebook-owner Meta Platforms jumped 5.4 per cent.
PayPal soared almost 10 per cent after it raised its annual profit guidance and said activist investor Elliott Management had a more-than-$US2-billion stake in the financial technology firm.
CVS Health gained 6.3 per cent after the largest US pharmacy chain raised its annual profit forecast when it posted strong quarterly results.
“We’re going through second quarter earnings and, by and large, from the tech complex to consumer discretionary and industrials, we’re seeing a lot of better-than-feared prints, and that’s just good enough right now,” said Sahak Manuelian, managing director of trading at Wedbush Securities in Los Angeles.
US services sector rebounds
The turnaround comes as the latest economic data showed the US services industry unexpectedly rebounded in July as supply bottlenecks and price pressures eased.
The Institute for Supply Management said its non-manufacturing PMI (purchasing managers index) rebounded to a reading of 56.7 points last month (from 55.3 in June). This increase ended three straight monthly declines.
Economists polled by Reuters had forecast the non-manufacturing PMI decreasing to 53.5. A reading above 50 indicates expansion in the services sector, which accounts for more than two-thirds of US economic activity.
That emboldened enough investors to bet that the US economy was not in recession, despite the nation’s output (or GDP) slumping for six months in a row.
ABC/Reuters
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