ASX rises after Labor victory, global equity markets rebound

Australian shares have opened higher on Monday, following the Labor Party’s election victory after nearly a decade out of power.

ASX 200 was up 21 points or 0.3 per cent to 7,164 at 10:11am AEST.

The Australian dollar was up at 70.63 US cents at 10:11am AEST.

Among the top movers were Codan (+13.3pc), Elders (+9.1pc) and A2 Milk (+5.1pc).

However, Block dopped 3.6 per cent, Novonix lost 1.7 per cent and Zip was down 1.6 per cent.

Global equity markets rebounded on Friday after the S&P 500 pared losses that briefly took it into bear market territory.

China cut its prime rate for five-year loans, which influences mortgage prices, by 15 basis points in a reduction that was sharper than expected as authorities seek to cushion the impact of an economic slowdown. 

While a late-day rally on Friday stopped the S&P 500 from confirming a bear market, the gloom on Wall Street led the benchmark to fall for the seventh consecutive week, an event that has occurred only five times since 1928, according to S&P Dow Jones Indices.

How long the downdraft in equities lasts will depend on when inflation breaks, said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia.

The S&P 500 closed up 0.01 per cent after being down 2.27 per cent at one point or below the level would confirm a bear market — a 20 per cent decline from its January 3 record closing high.

The Dow Jones Industrial Average rose 0.03 per cent and the Nasdaq Composite already in bear territory, fell 0.3 per cent.

Equity valuations need to come down and the expected return on investments, the discount rate, needs to go up, said Stephen Auth, chief investment officer of equities at Federated Hermes.

“The market is starting to digest the idea that this might be a new world where the discount rate on risk assets is not zero anymore,” Mr Auth said.

“You’re seeing all these different areas of the market get pounded at the same time and it’s just been very unsettling for investors,” he added.

MSCI’s gauge of stocks in 47 countries closed up 0.37 per cent, but still fell for the seventh consecutive week, its longest losing streak since the index was launched in 1990.

Earlier in Europe, the pan-regional STOXX 600 index rose 0.73 per cent.

US Treasury yields fell for a third straight session on concerns about growth prospects. The yield on benchmark 10-year notes fell 6.5 basis points to 2.79 per cent.

Gold edged up, heading for its first week of gains in five weeks on persistent worries over economic growth and the dollar’s decline over the week.

Oil prices steadied, on course for little change for the week as a planned European Union ban on Russian oil balanced concerns that slowing economic growth will hurt demand.

Brent crude oil was up, trading at $US112.91 a barrel, by 10:36am AEST.


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