ASX futures gained 41 points, or 0.6 per cent, to 7193 near 8.00 am AEST, pointing to an upbeat start to trade.
U.S. stocks climbed and government-bond yields fell Wednesday after a recent advance, which could ease some pressure on technology shares.
The S&P 500 was up 1.45%. The broad index had also climbed Tuesday as investors bought shares in companies of all kinds. The Dow Jones Industrial Average rose or 0.86%, and the Nasdaq Composite gained 2.1%. Although all three indexes have posted gains this week so far, they remain in the red so far in 2023.
At the local level, the S&P/ASX 200 finished 1.1% stronger at 7268.1, its second straight gain of more than 1.0%, this for the first time since October 2020.
Commonwealth Bank hit an over 5 1/2% high after Australia's biggest-listed company by market capitalization revealed a A$2 billion on-market buyback. That helped lift the heavyweight financial sector, which rose 2.6%. Banks ANZ, NAB and Westpac rose 1.7% to 2.4%.
The top performing component in the ASX 200, Computershare surged 11% following an upgrade to its annual guidance, dragging the tech sector up 4.2%. Altium, WiseTech, Appen and Tyro gained 4.3% to 5.4%.
Commodity stocks battered, cutting strong gains from earlier this week.
Elsewhere, the pan-continental Stoxx Europe 600 climbed 1.7 percent. In Asia, major stock indexes ended with gains. Hong Kong’s Hang Seng climbed 2.1 percent and Japan’s Nikkei 225 rose 1.1 percent. China’s Shanghai Composite and South Korea’s Kospi each rose 0.8%.
In commodities, gold futures added 0.3% to $US 1833.50 a barrel; Brent crude rose 1.1% to $US91.79 a barrel; iron ore down 4% to US$146.50.
In bond markets the yield on the Australian 10-year bond eased to 2.10%. The US 10-year Treasury yield also dipped to a benchmark 1.95%. Yields fall when prices rise.
The Australian dollar was at 71.80 US cents late in the 8. AEST, higher than the previous close of 71.44. The WSJ Dollar Index, which measures the US dollar against 16 other currencies, slipped to 89.59.
Asia
Chinese shares finished higher on Wednesday, as telecom stocks and liquor makers led advances. Fundamentals of the telecom companies are strengthening on a benign competitive environment, 5G migration and strong demand for digital services: Nomura. China Mobile jumped 10% to a record high, while China Telecom gained 2.8% and telecom equipment maker ZTE up 3.3%. Leading Chinese baijiu producers Kweichow Moutai and Wuliangye Yibin rose over 3% each. Among the laggards, property developer China Vanke fell 1.8% after its January contracted sales were halved compared with a year earlier. The Shanghai Composite index gained 0.8%, the Shenzhen Composite index climbed 1.6%, and the ChiNext Price Index added 1.3% after Tuesday's drop.
In Hong Kong, stocks ended the day higher, bouncing back from two days of losses as the tech sector recovered. The Hang Seng Index, a benchmark, was up 2.1%. Alibaba was the index’s biggest gainer, as investor concerns over a potential stake sale by its biggest shareholder, SoftBank, waned. The investment colossus based in Japan, which also holds a big stake in Alibaba, added that Alibaba’s recent move to register an extra one billion American depositary shares, raising fears that the company will sell some of its shares, isn’t connected to any future transactions. The Chinese e-commerce firm soared 6.8%, while two other tech stocks, NetEase and Xiaomi, gained 4.9% and 4.8%, respectively.
And in Japan, the Nikkei Stock Average gained 1.1%, to 27579.87, tracking overnight gains in regional equity markets and US stock futures and underpinned by strong earnings. Shares in Shimano jumped 17% after the bicycle-parts maker forecasted a 1.3% increase in 2022 net profit after seeing an 83% jump in net profit in 2021. JFE Holdings rose 9.0% following an upgrade of its revenue and net-profit views for the fiscal year. Nissan Motor gained 5.7% after reporting a 3Q net profit that exceeded consensus.
Europe
European stocks gained after a buoyant session in Asia and with traders looking for a higher start on Wall Street. The pan-European Stoxx 600 surged 1.7%.
“European stock markets are continuing the upward move after a positive session in Asia and strong close in US indices, despite some overall uncertainty seen across the markets,” says Walid Koudmani, chief market analyst at XTB.
In London, the FTSE 100 closed up 1.01% at a new two-year high after another strong session, buoyed by travel and leisure and a possible easing of Covid-19 restrictions in England at the end of the month, according to Michael Hewson, chief market analyst at CMC Markets.
Oil prices rebounded from their largest single-day drop this year on Tuesday, and the possibility of US-Iran talks returning to the fore is a constructive development, Hewson notes.
North America
U.S. stocks jumped and government-bond yields retreated Wednesday after having climbed recently, possibly alleviating some pressure on technology shares.
The S&P 500 was up 1.45%. The broad index had also climbed Tuesday as investors scooped up shares of companies across industries. The Dow Jones Industrial Average rose 297 points, or 0.86%, and the Nasdaq Composite was up 2.1%. All three indexes are higher this week so far, but they remain lower in negative territory year to date.
The advance on Wednesday came with all 11 sectors of the S&P 500 rising. Many were up at least 1%.
Markets have been stung in recent days by a rout in tech shares. Investors have been selling shares of tech companies with high valuations, in advance of a likely rise in interest rates by the Federal Reserve.
That will trigger optimism but, for now, analysts said, the volatility could continue until investors receive clear guidance from the Fed on how many rate increases are in the cards. Others are wagering that the turbulence will persist all through 2022.
“We could see some spikes in volatility over the course of this year, particularly as the Fed begins its tightening cycle; that’s typically when markets get a little bit of indigestion,” said Mona Mahajan, a senior investment strategist at Edward Jones.
New inflation data due out Thursday is expected to offer investors more insight into how soon the Fed will start raising rates following a slashing of them in 2020 to buffer the economy from the fallout of Covid-19. Matt Weller, global head of market research at Forex.com, said there is enough of a jump in core inflation data for the Fed to act more aggressively and it could raise rates by 0.5 percentage point.
Analysts said a more hawkish Fed would be even more damaging to tech firms. Shares of Facebook parent Meta Platforms jumped 5.4%, having plummeted 20% last week. Alphabet, Google's parent, rose 1.6%. Technology companies typically do well when bond yields are low as some investors will pay a higher price for shares that they expect will generate inflated profits in the future.
“Don’t necessarily believe this is the worst it’s going to get, and if you’re nervous I would think about easing up on risky exposure,” said Mr. Weller.
The yield on the benchmark US 10-year Treasury note eased to 1.934% on Wednesday from 1.954% Tuesday, its highest close since July 2019. Yields move in the opposite direction of prices.
Yields on European bonds also dipped on Wednesday, with the yield on the 10-year German bund slipping to 0.218% from 0.264% on Tuesday, according to Tradeweb.
“What everyone in the market is trying to do now is figure out how this global turnaround of central banks will play out,” said Carsten Brzeski, the global head of macro research at ING Groep. “There’s a question of how the stock market will respond to this new normal.”
Uber Technologies and Walt Disney were scheduled to report results late Wednesday. Chipotle Mexican Grill rose 10% after it said it had once again raised menu prices, and that it would all but certainly raise them further this year. Lyft jumped 6.8% after the ride hailing company reported weaker than expected ridership numbers. CVS Health slid 5.45% after the drugstore chain posted quarterly results that beat expectations but gave a mixed full-year outlook.
Investors are watching issues that may impact earnings, including the expected rise in interest rates, high inflation and supply-chain bottlenecks. As of late last week, 34 companies from the S&P 500 had provided lower earnings guidance than analysts had expected, and 13 had supplied guidance that was better than expected, based on FactSet data.
