Australian Shares Rise ahead of Budget
Australia posted their biggest daily rise in shares in a period of two-and-a-half months on Monday. Investors were optimistic about the U.S. President Donald Trump showing signs of recovery from COVID-19.
The S&P/ASX 200 index closed 2.6% higher at 5,941.6 points. This started the week on a firm note, following a 2.9% drop last week.
Stock markets around the world were up after doctors said President Donald Trump was responding well to treatment. He was flown to hospital after testing positive for coronavirus on Friday and now his condition is improving.
Australian markets were the first to react to Trump testing positive on Friday. And they were quick to respond to better news on that front. This was according to Henry Jennings, a senior analyst and portfolio manager at Marcus Today Financial Newsletter.
Jennings said they’ve also got the Reserve Bank of Australia meeting and the budget the next day. So, there’s a possibility they were going to see tax cuts and stimulus from the government.
Budget Deficit and Possibility of a Rate Cut
The country is set to forecast a record budget deficit of around A$200B or $143.62B for 2020-2021. Its government builds up spending to support the coronavirus-hit economy.
Jennings further said the possibility of a rate cut also boosted equities. A poll predicts the RBA will hold key rates at a record low 0.25%. This is though an overwhelming majority expect a cut in November.
A rebound in crude oil prices pushed the energy sub-index 4.5% higher. Heavyweights Woodside Petroleum and Beach Energy added 4.8% and 5.6%, respectively.
The financials sub-index ended 3.7% higher with the “big four” banks gaining between 3.3% and 4.4%.
Meanwhile, gold stocks closed marginally lower, while mining stocks added 2.1%.
Elsewhere, in New Zealand, the benchmark S&P/NZX 50 index ended up 0.6% at 11,898.26. Moreover, NZX-listed shares of Westpac and ANZ were the top gainers, adding more than 3% each.
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