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The Australian sharemarket looks set to snap a seven-day losing streak, but analysts warn it could just be a dead cat bounce

Jack Derwin
  • The ASX gained more than 1.5% early on Tuesday morning.
  • It comes after Wall Street rallied, with all major indexes gaining in the realm of 4.5% or above.
  • However, with the full impact and potential reach of the coronavirus still unknown, and fear abundant, some analysts are warning any gains could be a dead cat bounce.
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The Aussie market could be in for some temporary relief.

After seven consecutive days of losses, which have seen more than $200 billion wiped, the Australian Securities Exchange (ASX) looks like it'll post some modest gains. ASX Futures were indicating a 70-odd point rise, or around 1.1%, on Tuesday morning. It soon surpassed that, gaining more than 1.5% by 10:45 am.

https://twitter.com/EvanLucas_INV/status/1234591958355439616

It comes after Wall Street rallied overnight to turn back the sea of red which has swamped global markets since investors began to take the threat of the coronavirus seriously. The Dow Jones added nearly 1,300 points, or more than 5% on Monday, while the S&P 500 added 4.6% and the tech-heavy Nasdaq put on nearly 4.5% as money seemed to rush back in.

In part, that could be driven by positive headlines out of the US suggesting a coronavirus vaccine could be ready by the end of the year, and the prospect of central banks cutting interest rates again.

However, optimism on markets could be short-lived. Having just witnessed enormous volatility, analysts fear Wall Street's rally may be something of a 'dead cat bounce' – where markets jump temporarily only to be dragged down further. If that transpires, investors can expect more losses to come.

Given there is only a modest rise expected on Tuesday, it seems Australians aren't getting ahead of themselves at any rate.