The Australian share market is poised to open higher this morning following a bad run earlier in the week.
ASX futures were up 54 points or 0.77% to 7,039 early this morning.
Overnight, the US markets were optimistic, with the Dow up 1.1%, the S&P gaining 1.7% and the Nasdaq coasting to 2.1%.
Tech stocks rallied, as did US bank stocks, with Tesla (NASDAQ:TSLA) adding 5.1% and Facebook (NASDAQ:META) parent company Meta gaining 7.3%.
The latter’s gain comes on the back of its announcement that it will slash 10,000 jobs to cut costs as it refocuses its energies on the metaverse.
US economic data was softer but probably not soft enough to avoid another 0.25% rate rise. The consumer price index (CPI) rose by 0.4% in February, while annual growth eased from 6.4% to 6.0% in February, the lowest level since September 2021.
Annual growth of the core CPI fell from 5.6% to 5.5% in January.
Investors were encouraged by an easing in inflation and were less fearful of contagion developing in the banking sector following the collapse of the Silicon Valley Bank (SVB).
If you want peace, prepare for war
Late in the afternoon’s trade, stocks wobbled on the news of an incident involving a Russian fighter jet and a US Air Force drone over the Black Sea, which triggered fears of an escalation.
The Russian fighter jet forced down the drone over international waters on Tuesday after damaging its propeller, according to the US military.
Back home, the Australian Government was defending its AUKUS alliance and the eye-watering sum it is spending on nuclear submarines – in the order of $368 billion.
The government has been fending off accusations that the program will inflame relations with China and kick off a new arms race.
China claimed that the agreement was in breach of the global nuclear non-proliferation treaty, while others pointed to that country’s own military expansion.
The submarines will be nuclear-powered, which proponents say is within the rules – they do not signal a broader foray into nuclear armaments.
There were also domestic objections to the size of the investment at a time when many Australians are struggling with cost of living pressures and the government faces multiple competing fiscal challenges.
The collapse of SVB continued to spook European sharemarkets, which posted their steepest one-day fall this year on Monday.
European banking stocks dropped 5.8%, the biggest two-day sell-off since the start of the Russia-Ukraine conflict, with shares in Germany's Commerzbank (ETR:CBKG) falling 12.7%.
HSBC shares dropped 4.1% after it acquired the UK subsidiary of SVB for 1 pound, rescuing a key lender for technology start-ups in Britain.
Bitcoin reverses its fortunes
“Bitcoin has soared past US$26,000 extending its strong run so far this year, with the crypto gaining more than 55% this year, making it the best-performing asset class this year. After 2022’s sell-off and with prices at depressed levels, a little good news is going a long way,” said eToro market analyst Josh Gilbert.
“It has been a tumultuous week for bitcoin, initially falling on the news over issues with bitcoin-friendly banks, with crypto still licking its wounds from the issues of 2022. However, bitcoin’s fortunes quickly reversed, with the asset flexing its prowess and therefore could be the time for crypto to shine.
"If investors feel uneasy about centralised banking systems, they will turn to decentralised assets such as bitcoin or ethereum. While banks faced issues, bitcoin did its thing, settling transactions in seconds, and allowing investors access to their capital at any point.
“The asset also reacted well to the US CPI reading showing that inflation is moving in the right direction. Inflation and interest rate expectations continue to fall, a positive for risk assets such as bitcoin. The inflation fight isn’t done, but it is moving in the right direction, and investors recognise an opportunity with bitcoin, given the asset was so heavily depleted last year.”
In other news
Global oil prices fell by 4-5% on Tuesday on the back of ample crude supply balances, and as investors fretted about the impact of higher interest rates on the demand for oil.
The benchmark Brent crude oil price shed US$3.32 or 4.1% to US$77.45 a barrel – its lowest point this year – while US Nymex crude oil price fell by US$3.47 or 4.6% to US$71.33 a barrel.
Base metal prices were mixed yesterday, with the copper futures price falling by 1.4%, while the aluminium futures price gained 0.8%.
Other base metal prices were weaker by up to 1.5%. Gold futures fell by US$5.60 or 0.3% to US$1,910.90 an ounce, while spot gold was trading near US$1,905 an ounce at the US close.
Iron ore futures dropped by 45 US cents or 0.3% to US$130.04 a tonne.