Stan Choe
Wild swings that swept through financial markets overnight eased as trading headed westward to Wall Street on Monday. US stocks rose following sharp drops in Asia and then gains in Europe, while gold and silver prices rallied back from severe earlier losses.
The S&P 500 added 0.6 per cent and is on track to snap a three-day losing streak. The Dow Jones was up 439 points, or 0.9 per cent, and the Nasdaq composite was 0.8 per cent higher.
The Australian sharemarket is set to bounce higher, with futures pointing to a gain of 95 points, or 1.1 per cent, at the open. The ASX lost 1 per cent on Monday. The Reserve Bank announces its interest rate decision at 2.30pm AEDT today, with markets predicting rise of a quarter percentage point rise, the first hike in more than two years. The Australian dollar was trading at US69.47¢ at 5.10am AEDT.
Stocks of companies that make computer storage helped lead Wall Street, adding to gains from last week following several profit reports that topped analysts’ expectations. Airlines and cruise-ship operators were also strong, benefiting from a sharp easing of oil prices.
The centre of the action in financial markets was again precious metals, where momentum has suddenly halted after gold’s price had roughly doubled in just 12 months.
Gold briefly dropped below $US4500 per ounce in the overnight hours, down more than $US1000 from its high point reached just last week. It later erased its loss since Friday, before pulling back to $US4730.50, down 0.3 per cent.
Silver’s price has been on an even wilder ride recently, and it swung from a 9 per cent loss overnight to a gain of 1.2 per cent.
Gold and silver prices had been surging as investors looked for safer things to own amid a wide range of worries, including a Federal Reserve that may be set to become less independent, a US stock market that critics say is expensive, threats of tariffs and heavy debt loads for governments worldwide.
Their prices cratered on Friday, including a 31.4 per cent plunge for silver. Some on Wall Street saw it as a result of President Donald Trump’s nomination of Kevin Warsh as the next chair of the Fed. Warsh’s reputation as a former Fed governor may have raised expectations among some investors that he may keep interest rates high to fight against inflation, which would reduce the need to hide out in gold and silver for protection.
But many on Wall Street are also sceptical of that initial reading and say the expectation from Trump is likely that Warsh will cut interest rates, something the president has been demanding. That could give the economy a boost, but also inflation.
The Fed chair has a big influence on the economy and markets worldwide by helping to dictate where the US central bank moves interest rates. That affects prices for all kinds of investments, as the Fed tries to keep the US job market humming without letting inflation get out of control.
The recent swoons for gold and silver are likely more about the washout for some traders who had borrowed money to bet on metals’ prices continuing to soar, rather than about a wholesale change in expectations for demand for metals, according to Darrell Cronk, chief investment officer for Wealth & Investment Management at Wells Fargo
On Wall Street, Sandisk leaped 15 per cent to lead the S&P 500. The data-storage company added to its 6.9 per cent gain from Friday, after it reported stronger profit for the latest quarter than analysts expected. It credited demand created by the artificial-intelligence boom, among other things.
That helped offset a 1.1 per cent drop for Nvidia, whose chips are powering much of the world’s move into AI technology. The losses were worse in Asia, where AI winners plunged. South Korea’s Kospi fell 5.3 per cent from its record for its worst day in almost 10 months after chip company SK Hynix lost nearly 9 per cent.
The Walt Disney Co. fell 4.2 per cent even though the entertainment giant reported a stronger profit for the latest quarter than analysts expected. It warned of challenges keeping international visitors away from its US theme parks, among other things.
Oil prices dropped more than 4 per cent after Trump told reporters that Iran is “seriously talking to us.” It’s a potential signal of improving relations between the two countries, which could prevent a possible disruption to the global flow of oil.
That could mean less painful fuel bills for airlines and cruise ships. Carnival steamed 7 per cent higher, and United Airlines climbed 4.8 per cent.
In the bond market, Treasury yields edged higher after a report said that US manufacturing grew last month, when economists were expecting a contraction. The yield on the 10-year Treasury erased an earlier dip and rose to 4.27 per cent, up from 4.26 per cent late Friday.
In stock markets abroad, European indexes rose roughly 1 per cent following Asia’s washout. Japan’s Nikkei 225 fell 1.3 per cent, while stocks fell 2.2 per cent in Hong Kong and 2.5 per cent in Shanghai.
AP
The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.
