A second successive day of higher prices awaits investors in Australian shares on Wednesday, following a rally in the United States powered by an easing of Middle East tensions and Federal Reserve comments on interest rates.
However shareholders should temper their excitement as the Australian Securities Exchange (ASX) is expected to open only marginally higher, based on futures trading.
At the time of writing the S&P/ASX 200 share price index September contract was quoted just five points (0.05%) above the previous settlement at 8,540 points.
The scene was set on Wall Street on Tuesday (Wednesday AEST) where stocks jumped by more than 1% after President Donald Trump announced a ceasefire between Iran and Israel and Fed Chair Jerome Powell’s comments on the prospects for rate cuts were interpreted positively.
Oil prices also tumbled in response to the improvement in the Middle East situation, while Treasury yields and the dollar fell after Powell said "we are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance."
Speaking to the U.S. House of Representatives Financial Services Committee, he repeated rate cuts could wait until the effects of tariff increases are better known.
The Dow Jones Industrial Average surged 1.2% to 43,089 points, the S&P 500 was not far behind with a 1.1% jump to 6,092.2 and the heavy Nasdaq Composite surpassed them both with a 1.4% increase to 19,912.5.
Crude oil prices continued to plummet with West Texas Intermediate and Brent crude dropping 6% and 7.4% respectively.
"The cease-fire really [adds] fire to the stock market rally. We believe investors are wagering that calm in the Middle East is really a boon for stocks even as it weighs down bonds and oil prices," AXS Investments Chief Executive Officer Greg Bassuk was quoted by Reuters as saying.
The Australian sharemarket put a five-day losing streak behind it on Tuesday with the S&P/ASX 200 rising 1% to 8,555.5 points as eight of the 11 sectors traded higher.
Companies in focus today include Xero (ASX: XRO), which announced a A$3.5 billion acquisition in the United States, partly funded by a $1.85 billion capital raising, and Virgin Australia (ASX: VGN), which re-listed yesterday at a premium.
In the fixed interest markets, Australian 10-year bond yields fell 0.12% to 4.517% while two-year yields were steady at 3.228%.
