ASX futures were 104 points or 1.61 per cent higher at 6564 near 7am AEST on Thursday, indicating a gain at the open.
Stocks in the US turned higher on Wednesday, in a respite from a punishing week. The S&P 500 rose 2 percent as bond yields plunged, sending stocks with rich dividends into favor with investors. The Dow Jones industrial average climbed about 550 points, or 1.9 percent. Both indexes posted six consecutive daily declines through Tuesday, and earlier this week the Dow joined the S&P 500 in a bear market. The Nasdaq Composite rose 2.05 percent.
Of late, investors have been turning their focus to the U.K. Last week, the British government announced the largest set of tax cuts in decades. The news rattled investors and lifted the yield on the 10-year government bond earlier this week.
On Wednesday, however, bond yields came back down to earth after the Bank of England said it would purchase U.K. government debt with extended maturities “on whatever scale it deems appropriate.” That set the stage for Wednesday’s advance in US stocks, said David Lefkowitz, head of US equities for UBS’s global wealth management business.
In commodities markets, Brent crude oil climbed 3.4 per cent to $US89.20 a barrel, while gold rose 1.88% to US$1,659.47.
Within the local bond market, yield on Australian 2 Year government bonds was down at 3.41% and 10 Year higher at 4.09%. The yield on the 2 year US Treasury note also rose in overseas trading to 4.11% and the 10 year US Treasury note moved up to 3.72%.
The Australian dollar rallied to 65.14 US cents, up from Wednesday’s close of 64.32. The US dollar, which the Wall Street Journal Dollar Index measures against 16 other currencies, weakened to 104.11.
Asia
Chinese shares closed low, also reversing a recent downward trend in the face of weak market sentiment in the face of a murky economic environment. Market turnover remains quiet ahead of the National Day holiday next month, Dongguan Securities says in a note. Miners and auto makers saw sales, with Huayou Cobalt falling 10% and Great Wall Motor falling 4.4%. The Shanghai Composite Index fell 1.6% to 3045.07, and the Shenzhen Composite Index and the ChiNext Price Index both fell 2.6%.
Hong Kong’s Hang Seng Index ended down 3.4% at 17250.88, its biggest one-day percentage loss since May as sentiment was bearish across sectors. Property developers were dumped after the news of CIFI Holdings failing to pay nonstandard debt, stoking concerns over deteriorating liquidity. Country Garden Holdings fell 13 percent, Longfor Group fell 5.2 percent, and CIFI plunged 32 percent. Fears for the global economic outlook weighed on manufacturers such as Techtronic Industries, which tumbled 5.9%, and Sunny Optical, which slipped 2.8%. Tech stocks also dragged on the market, as JD.com dropped 5.6% and Alibaba Group fell 4.1%.
Japanese shares closed sharply lower on declines in real estate and shipping issues as policy tightening by major central banks fuels uncertainty about the global economic environment. The major shipper Mitsui O.S.K. Lines fell 3.8% and Sumitomo Realty & Development lost 3.5%. The Nikkei Stock Average falls 1.5% to end at 26173.98.
Europe
European shares rose in trade on Thursday. The Pan-European STOXX Europe 600 Index was up 0.30%, the German DAX was up 0.36%, and the French CAC was up 0.19%.
In London, the FTSE finished Wednesday up 0.3% after the Bank of England pledged to start buying U.K. government bonds with longer maturities “on whatever scale is necessary” as the pound plunged.
The Bank of England’s u-turn (or is it?) on QE has spurred beleaguered buyers back into the market, says IG’s chief market analyst Chris Beauchamp. The BOE’s reaction has been a positive development, particularly compared with when the bank did nothing earlier in the week, Beauchamp says.
Land Securities Group PLC, Segro PLC and British Land Co. led the U.K. index’s falling businesses.
North America
U.S. stocks swung up Wednesday, a respite after a week of brutal losses. The S&P 500 rose 2 percent as bond yields dropped, making stocks seem more attractive to investors. The Dow Jones industrial average gained almost 550 points, or 1.9 percent. As of Tuesday, both indexes had fallen for six days in a row, and since the start of this week the Dow became the second major index to enter a bear market along with the S&P 500. The Nasdaq Composite rose 2.05 percent.
Bond yields whipsawed on the news that the Bank of England would start buying U.K. government bonds—a move to steady markets. The yield on the benchmark 10-year Treasury note in the United States briefly rose above 4 percent for the first time in over a decade, but it retreated just as quickly. The 10-year yield fell by the most in more than a day since March 2009, when the financial crisis was still under way.
This year, stocks have faced mounting pressure from investors concentrating on the soaring inflation and central banks’ attempts to combat it through higher interest rates. Last week, the Federal Reserve raised rates for the fifth time this year.
Economic signals of a slowdown are being recorded more frequently, a trend that now includes, by one measure, the end of a seven-year run of rising house prices.
Attention among investors has shifted in recent days to the United Kingdom. Last week, the British government announced its largest tax cuts in decades. That news spooked investors, and the yield on the 10-year sovereign bond jumped earlier this week.
The situation raised interest rates in other places as well, including in the United States. And when rates went up, investors had other places they could put their money to generate returns and stocks looked more expensive.
But on Wednesday, bond yields returned to earth after the Bank of England promised that it would buy U.K. government bonds of long maturities “on whatever scale is necessary.”
That helped push up United States stocks on Wednesday, said David Lefkowitz, the head of U.S. equities for UBS’s global wealth management business.
“The pressure on U.S. stocks in the last handful of trading days has been to a certain extent an expression of some of the upheaval within the fixed-income market,” said Mr. Lefkowitz. “As that anxiety tapers off, we’re getting a little bit of a better tone in equities.”
“There’s fear that the entire system implodes and demand can’t cope with this level of tightening,” said Agnes Belaisch, a chief strategist at the Barings Investment Institute. “There are straws in the wind out there that maybe do suggest a recession.
The global crude-oil benchmark Brent rose 3.5% to $89.32 a barrel.
The Nord Stream pipelines that carry Russian gas to central Europe had been sabotaged, said Ursula von der Leyen, the president of the European Commission, in a tweet. The Russian state-owned Gazprom issued, in Crimea’s capital, Sevastopol, what analysts said was a thinly-veiled threat to end exports of the fuel through Ukraine.
In U.S. trading at 4 p.m. Eastern time, the shares of Biogen were up 30 percent after the company announced that an experimental drug for Alzheimer’s disease was found to significantly slow the progression of the disease in a large study. One of the companies behind the study, the Japanese pharmaceutical firm Eisai, surged 17 percent in Tokyo trading.
Apple fell 1 percent, as Bloomberg reported that the company is abandoning plans to increase iPhone production.
