Jobs figures, potential virus vaccine behind rally on the ASX
The Australian share market has broken above the 5500 point level in its best trading day this month, on the back of positive jobs data and news of a possible coronavirus vaccine.
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The Australian share market has rallied to close above 5500 points as local investors welcomed early signs of a potential coronavirus vaccine in the US and better news on the jobs front.
The nation’s key share market benchmark, the ASX 200, jumped by as much as 2.7 per cent in early trade on Tuesday following a strong lead from Wall Street.
The index, which broadly tracks the value of the nation’s 200 biggest listed companies, gave back some of those gains to finish the day 1.8 per cent higher at 5559.5 points in its best session of the month.
It was the third straight day of gains and the first three-day rally in two months.
Big miners were key winners with BHP surging 5.9 per cent to $35.05 while Rio Tinto gained 4.7 per cent to $94.52.
The buoyant mood among local investors followed US biotech Moderna reporting initial positive results for its COVID-19 vaccine in the first phase of human trials overnight Tuesday.
That sent the Dow Jones Industrial Average up 3.9 per cent to 24,597.3 points while the S&P 500 jumped 3.2 per cent to 2953.9 points.
The upswing for local stocks also came as investment bank Macquarie said the worst of the share market sell-off may have passed so long as there was no second wave of infections or shutdowns.
In a research note to clients, Macquarie said that if March 23 emerges as the low point of the coronavirus stock market meltdown, then the bourse is likely to be in the “late contraction” phase of a recession” where “stocks often go up even when unemployment rises above 10 per cent.”
CMC Markets chief strategist Michael McCarthy said the share market was at a key inflection point given it has been stuck in a trading range of 5100 points to 5500 points in the past few weeks.
The last time the ASX 200 closed above 5500 points in late April, it plunged 5 per cent the next day.
“What happens in the next few days will be very important,” Mr McCarthy said.
Investors also took heart from new figures which showed the avalanche of job losses from mid March has begun to show signs of slowing.
The nation lost 7.3 per cent of its jobs from the middle of March to early May, according to payroll figures released by the Australian Bureau of Statistics on Tuesday.
The pace of weekly job losses slowed to 1.1 per cent for the week ending May 2, while hard-hit sectors such as the accommodation and food services industry showed signs that they have begun to hire again.
RBC chief economist Su-Lin Ong said the easing of job losses, coupled with a softening of some coronavirus restrictions, was welcome news for the economy.
“Labour shedding has been front-loaded and the bulk of it is behind us, with far more modest losses near term,” Ms Ong said.
“(There are) encouraging early signs in the hardest-hit groups, although we caution that the eventual recovery in the labour market will take considerable time, likely years, amid much uncertainty, sub-par growth and possible permanent changes to industry post COVID-19.”
ANZ economist David Plank said the labour market “appears to have stabilised”.
The ASX 200 hit a record closing high of 7162.5 points on February 20.
It them slumped 36.5 per cent to 4546 points on March 23 but has since gained 22.3 per cent to 5559.5 points.
with THE AUSTRALIAN, AAP
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