Market Open: Better mood on Wall Street may buoy local market

Good news out the US bodes well for the local market. Photo / AP

Positive US data coupled with growing optimism that China is on the road to recovery will likely give risk appetite a boost today.

In the US, the Institute of Supply Management's non-manufacturing activity index jumped to 57.1 in June, almost returning to pre-pandemic levels. Any reading above 50 points denotes expansion and services account for about two-thirds of the US economy.

The Dow Jones Industrial Average was up 1.7 per cent at 8am in Wellington while the S&P 500 had lifted 1.6 per cent and the Nasdaq had gained 2.2 per cent.

Amazon shares hit US$3,000 for the first time, valuing the company at more than US$1.5 trillion.

Yesterday's 5.7 per cent rise in the Shanghai Composite Index also buoyed investors' spirits.

"China's stock markets are feeling the love seen in the US with the blue-chip Chinese share index rising to its highest level in five years as investors increase bets on a revival in the Chinese economy," said Stuart Ive, treasury manager for OMF.

"The improved sentiment, combined with data showing US services industry activity rebounded sharply in June, overnight saw a risk-on move," he said.

The move could see the local stock market continue to gain. The S&P/NZX 50 Index rose 0.8 per cent yesterday after Metlifecare led the benchmark higher, jumping 10.3 per cent to $5.76 after Swedish investor EQT made a new takeover bid at $6.00.

The New Zealand dollar also continues to benefit from the better global mood.

The kiwi was trading at 65.63 US cents at 8am in Wellington versus 65.50 cents at 5pm yesterday.

Ongoing concerns about covid-19, however, may cast a pall on things.

US covid-19 cases rose to 2.91 million and the death toll hit 130,090 after cases rose in 38 states over the last 14 days.

In Australia, the border between New South Wales and Victoria is due to be shut because Victoria continues to report new cases.

Against that backdrop, investors will be watching for the Reserve Bank of Australia's cash rate decision at 4:30pm NZ time.

The RBA is providing considerable stimulus to the economy through a range of policies and will continue to do so, said Westpac Banking Corp. However, "interest rates and policy settings will be unchanged in July."

Domestically, the New Zealand Institute of Economic Research's quarterly business opinion survey at 10am will be watched for a steer on how businesses are feeling ahead of the rapidly approaching September election.

- BusinessDesk