ASX set to rally following Wall Street’s comeback

The Australian dollar was up 0.6 per cent at US67.79¢.On Wall Street, US stocks rallied after data allayed fears of a supercharged jobs market that would support a more aggressive policy path. US Treasury yields ticked lower and a gauge of the dollar declined.P 500 recovered all the losses suffered in the previous two days, as more than 95 per cent of its shares advanced, albeit in thin holiday trading. The tech-heavy Nasdaq 100 outperformed, with gains approaching 3 per cent.

The rally is a ray of light as a dismal year for stocks and bonds draws to a close. Global equities have lost a fifth of their value this year, the largest decline since 2008 on an annual basis, as tech bore the brunt of the selloff. An index of global bonds has slumped 16 per cent amid sticky inflation and rising interest rates.

Stocks are rebounding after a selloff on Wednesday as the focus shifted to risks from the spread of COVID-19. The US said it would require inbound airline passengers from China to show a negative COVID-19 test before entry. In Italy, health officials said they would test arrivals from China after almost half of passengers on two flights from China to Milan were found to have the virus.

Tom Essaye, a former Merrill Lynch trader who founded The Sevens Report newsletter, said: “Markets enter 2023 at important transition points. One path is paved with continued disinflation, resilient earnings, moderating growth, a balanced labour market, and higher stock and bond prices. The other path is paved with sticky inflation, slowing growth, a continued tight labour market and lower stock and bond prices.

Source: News Formal (newsformal.com)

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