ASX 200 set to open gap down on weak global cues

Summary

  • The ASX 200 Futures is indicating a soft opening by 0.35% or 24 points, taking cues from the global markets.
  • A report that the Biden administration is expected to propose a sharp increase in capital gains tax for wealthy individual, halted the global markets rally.
  • The dollar index gained 0.19% to 91.287, while the Australian dollar was down 0.63% to 0.7703.

On Thursday, the ASX 200 came back in green and charged higher by 0.83% to 7055.4. The Australian market closed at the day’s high, which in general is a bullish sign for the next trading session. However, the ASX 200 Futures is indicating a soft opening by 0.35% or 24 points, taking cues from the weak global markets.

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Global equity markets traded lower on Thursday weighed down after a report that the Biden administration is expected to propose a sharp increase in capital gains tax to near 40% for wealthy individuals, nearly double the current rate. On Wall Street, the Dow Jones fell 0.94% to 33,815.9 on Thursday, while the S&P 500 lost 0.92%. The NASDAQ also shed 0.94%, closing the session at 13,818.4.

A big chunk of money that's in the market at this point is non-taxable and whenever news like these make headlines, investors just sell, wanting to pocket the gains in the current year.

The fall in the US markets has led to an increase in the CBOE VIX index by 6.91% to 18.71. Thursday’s high of 19.9 also marks the highest level for the month. Today’s weak opening of the Australian market is expected to spike ASX 200 VIX index as well, which was down by 6.6% on Thursday.

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The benchmark US Treasury yields fell alongside the equity markets on the capital gains tax issue. The 10-year notes last rose 3/32 in price to yield 1.54%, from 1.557% on Wednesday, continuing its mild downtrend.

While the dollar index gained 0.19% to 91.287, the Australian dollar was down 0.63% to 0.7703, closing at the lowest level for the week.

The sentiments in the cryptocurrency market have also taken a hit. Bitcoin last traded 4.73% down at US$51,297, while Dogecoin was down by 13.9% to US$0.2621.

Read More: What fuelled Bitcoin’s recent push to US$61,000

Crude oil prices rebounded

Oil prices trader slightly higher as concerns over production cut from Libya offset worries that rising coronavirus cases in India and Japan would cause energy demand to decline.

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The oil market is reverting back to the equilibrium. However, the realisation that a global comeback in oil demand cannot materialise without a comeback of the world’s third largest importer, India,  is denting the sentiments. India is diving deeper into a major crisis with coronavirus infections and death toll setting new records every day.

The WTI crude oil price rose 0.5% to US$61.63 a barrel and the Brent crude oil was up 0.4% to US$65.57 a barrel. 

Hence, energy producers such as Santos Limited (ASX:STO), Oil Search Limited (ASX:OSH) and Woodside Petroleum Limited (ASX:WPL) could trade mildly higher today.

Gold traded lower
Spot gold dropped 0.7% to US$1,781.86 an ounce while Silver fell 1.83% to US$26.09.

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Gold Miners such as New Crest Mining Limited (ASX:NCM), Northern Star Resources Limited (ASX:NST), De Grey Mining Limited (ASX:DEG) and Silver Lake Resource Limited (ASX:SLR) could have a weak opening today.

Read More: Three easy ways to amp up an underperforming portfolio

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