With Wall St closed for Labor Day, all eyes were on the European markets overnight and they didn‘t disappoint.
European shares ended their session near record levels, led by technology stocks.
With no action on Wall St to affect the opening of the ASX and Europe gaining, the ASX is expected to inch higher in morning trading.
Here’s what we’ve seen:
- Futures at 5.03am AEST pointed to a rise of 0.1%.
- The Australian dollar retreated, falling 0.4% to US74.34¢ at 5.22am AEST.
- Global oil prices fell by 0.5% after Saudi Arabia cut crude prices for Asian buyers. This raised the prospect of fierce competition among sellers. The rise in COVID-19 cases may cloud the crude demand outlook.
- The Brent crude price fell by US39 cents or 0.5% to US$72.22 a barrel.
- Aluminium rose by 1.5%. Note, this was near the highest level it has been since May 2011 and was due to a coup in Guinea which triggered concerns that supply of bauxite could be interrupted.
- Copper was up 0.2%.
- Lead was down 1.8%.
- Nickel was down 0.8%.
- Spot gold was trading near US$1,823 an ounce.
- Iron ore dropped US$13.55 a tonne or 9.3% to US$131.50 a tonne on the back of environmental curbs in China.
Australian markets
The Reserve Bank Board hands down its policy decision at 2.30pm AEST today.
With the Delta outbreak worsening, the RBA will revisit the question of delaying a planned taper of bond purchases.
The spread of Delta has curbed the prospects of a rapid economic rebound.
Bloomberg recently surveyed 16 economists, with 10 saying they expected the RBA to defer scaling back quantitative easing.
Despite this, Governor Philip Lowe has said that a scale-back wouldn’t impact the economy all that much and that the government was better placed to offer support.
“The governor argued strongly in favour of the taper plan last month on the grounds that additional QE would largely impact 2022 growth – which still looks likely to be strong – and that fiscal policy was more appropriate,” said Andrew Boak, chief economist for Australia at Goldman Sachs (NYSE:GS) Group Inc.
“Both these arguments remain as valid as they were a month ago.”
Last month, the RBA held on to its plans to scale back weekly bond purchases from September to A$4 billion ($3 billion) from A$5 billion.
The economy since then has weakened, however with the US Federal Reserve and European Central bank signalling a cautious pullback of stimulus later this year, the RBA has some cover.
The RBA has indicated that worsening circumstances leading to a significant setback to recovery, could see it respond.
However, as virus strategy has moved away from eradication to vaccination, this may cause a rethink.
Vaccination means a slower re-opening and lifting of restrictions.
No doubt, the RBA’s comments today will affect the market in some way, however, it seems the stock market is still hanging its hat on the resilience of Australia’s economy.
In the meantime, the ASX is set to open higher.
Australian indices
- ASX 200 lifted 0.074% to 7,528.50
- ASX24 futures rose 0.2% to 7,538
- S&P/ASX Small Ordinaries fell 0.24% to 3,585.60
- All Ordinaries fell 0.037% to 7,823.80
US markets
US markets were closed, yet Wall Street’s tech-heavy Nasdaq index’s record high on Friday was good for European markets.
European markets
European tech stocks were up 1.7% on the back of the Nasdaq performance last Friday.
The tech index ended at 829.31 points – a 2021 peak and its highest since December 2000.
Investors have moved into tech stocks due to uncertainty over monetary policy and rising COVID-19 cases. It is little wonder they have made this move as tech is the best-performing sector through the pandemic.
Investors are also looking at the European Central Bank (ECB), which like the RBA meets this week: hawkish policymakers are calling for the ECB to start paring back bond purchases with inflation surging and the growth in euro zone resilient.
Media and retail stocks are also performing well.
European indices
- STOXX 600 rose 0.69% to 475.19
- German Dax rose 1% to 15,932.12
- UK FTSE rose 0.7% to 7,187.18