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ASX surges 3.9% amid concerns markets are ‘getting ahead of themselves’

The share market has snapped a three-day losing streak soaring up 222.5 points, or 3.9 per cent, to 5942.3 and adding $68.2 billion to the boards in the best single day in more than two months.

News that the US Federal Reserve will buy US corporate bonds put a spring in the step of global equity markets and reassured investors that it was prepared to do whatever it takes to prop up the US economy.

The ASX200 was certainly heartened by the actions of the Fed. The Big Four Banks led the charge after finishing in the red for four consecutive days. Energy stocks responded positively, as did the major telcos.

Market darling and Buy Now Pay Later trendsetter Afterpay reached a record high of $56.52 after surging 10.5% in the session.

BetaShares Chief Economist David Bassanese says the stock market’s extraordinary rally has relied on the expectation that the US Federal Reserve will continue pumping hundreds of billions of fresh liquidity into the system.

“It’s certainly driving the US market higher and as a result, is driving markets around the world higher, including our own,” Mr Bassanese tells Brooke Corte.

Hopes of a V-Shaped recovery remain but economic activity is slow, and David Bassanese is concerned that valuations are nearing levels not seen since the dot com bubble of the late 1990s.

“Earnings are week, and the higher the market rises the more overvalued it gets, which creates the risk of a bigger and sharper downturn,

“I think the markets are getting ahead of themselves.”

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