Investors erase 2016’s losses at ASX with $31 billion rally

Brexit wiped out on June 24 US$2.1 trillion (A$2.8 trillion) from the global markets, but because of the return of Australian investors to the market, the Australian Stock Exchange (ASX) rallied on Monday. The rally boosted the ASX to a one-month high and erased 2016’s losses by adding A$31 billion (US$23.36 billion) to the top 200 listed companies’ combined market capitalisation.

Similarly, Wall Street had a record Monday night with the S&P500 adding 0.5 percent to 2,139.99 at 2:48 pm in New York, breaking the previous interday record set in May 2015. The Dow Jones Industrial Average went up 131 points, or 0.7 percent to 18,277.4.

In turn, Australian shares are set to open higher on Tuesday morning. The Australian Financial Review reports that the SPI futures would likely go up 0.6 percent on opening.

Monday’s ASX rally was due to Wall Street’s strong lead and improved commodity prices with the big four banks and miners heading the broad-based ASX rally. Only about a dozen stocks in the top 200 traded lower, notes the Sydney Morning Herald.

Both the benchmark S&P/ASX 200 index and the All Ordinaries index grew 2 percent to 5,337.1 points and 5,417.6 points, respectively. The big four banks increased from 2.3 to 3.5 percent. The positive US jobs report versus continued global risks won with gold and silver prices teetering on two-year highs.

The strong market was also felt in the region with the Korean, Chinese and Japanese markets all trading higher. But Ric Spooner, chief market analyst at CMC Markets, warns of overconfidence on Wall Street as the risk-on sentiment could be short term. The improved US labour market “creates the risk that the market is too confident about the Fed not hiking rate again over the next 12 months,” says Spooner.

Britain’s currency and stocks also improved on Monday with Andrea Leadsom, rival of Home Secretary Theresa May, unexpectedly dropping out of the Tory leadership race to replace outgoing Prime Minister David Cameron. He described May as strong, competent and “more than able to provide the leadership our country will need in the years ahead.”

VIDEO: Anthony D’Paul’s outlook for Australian market this week, July 11, 2016