The Australian sharemarket should rise at this morning’s open after Wall St rebounded on Friday.
Here’s what we know:
- The Aussie dollar rose from lows near US71.90 cents to highs near US72.75 cents and was near US72.55 cents at the US close.
- Global oil prices rose by around 1% on Friday ahead of a meeting of OPEC+ producers today. Analysts expect that producers will add just 400,000 barrels per day in extra output in November.
- The Brent crude price rose by US97 cents or 1.2% to US$79.28 a barrel.
- The US Nymex crude price rose by US85 cents or 1.1% to US$75.88 a barrel.
- Base metal prices were mixed on Friday. Tin, zinc and aluminium fell up to 0.6%. Other metals rose up to 2.9% with lead up the most. Over the week metals fell with tin down 7.9%. Lead bucked the trend, up by 0.6%.
- The gold futures price rose by US$1.40 an ounce or 0.1% to U$1,758.40 an ounce.
- Spot gold was trading near US$1,758 an ounce at the US close. Over the week gold rose by US$6.70 or 0.4%.
- Iron ore fell by US$1.25 a tonne or 1.1% to US$117.00 a tonne. Over the week iron ore rose by US$6.85 or 6.2%
Australian market
Today’s rise is expected to be led by the energy sector, following a lift in the oil price with Brent crude up 1.2% to $US79.28 a barrel on Friday and US West Texas Intermediate higher at $US75.88.
This should reverse last week’s downward trend, however the short to mid-term outlook is a little trickier.
Australian shares fell last week as markets grappled with the prospect of central bank tapering and the risks posed by lingering inflation and rising bond yields.
The S&P/ASX 200 dropped 2.1% over the week: it fell 2% or 146.7 points, to 7,185.5 on Friday.
“The risk of a more severe correction ... remains high – particularly with seasonal weakness for sharemarkets running into mid-October in the US and into November in Australia,” said AMP Capital’s chief economist Shane Oliver.
Dragging the market down on Friday were the banks: Commonwealth Bank tumbled 4.1% to $100.08, National Australia Bank dropped 2% to $27.27, ANZ fell 2.5% to $27.44 and Westpac declined 2.3% to $25.41.
Despite CBA’s decline, it has bought back $6 billion worth of its shares. The off-market transaction enabled the major to buy back about 67.7 million of its shares, representing 3.8% of the issued share capital.
Looking at the best and worst performing sectors, Energy, was up over 6% followed by Financials and Utilities, both up over 1%. The worst performing sectors included Information Technology down over 5% followed by Healthcare down over 4% and Materials down just under 1%.
The best performers in the ASX/S&P top 100 stocks included Orica Ltd (ASX:ORI) up over 14% after brokers updated their target expectations for this stock; a2 Milk Company Ltd up over 9% and Oil Search Ltd up over 8%. The worst-performing stocks include NextDc Ltd down over 11% followed by Afterpay Ltd (ASX:APT) down over 8% and Xero Limited down over 7%.
What's next for Australian share market?
According to Wealth Within founder and analyst Dale Gillham, “The Australian stock market has once again exhibited indecision given that it fell away last week to trade lower than it did the week before only to rise back up to near where it opened for the week. While this is a good sign, as I mentioned last week, I am not getting too excited just yet.
“The all-time high on our market occurred on August 13 and by Wednesday the market had fallen nearly 6% although I suspect it has further to fall.
“We are in the timeframe for the low to occur and despite the market showing some resilience in the last past week, I don’t believe the All Ordinaries Index has fallen enough in price to confirm the low. I expect the low to occur anytime from now until mid-October or possibly a little later with my target below 7,200 points.
“Many stocks are looking quite attractive right now although I urge investors to exercise caution in the short term until we have confirmation that the market has turned. Those who are patient will be rewarded as they are many good buying opportunities likely to appear in November.”
Australian indices
- ASX 200 fell 2% to 7,185.50.
- ASX24 futures rose 0.7% to 7,180.
- S&P/ASX Small Ordinaries fell 1.53% to 3,419.90.
- All Ordinaries fell 1.88% to 7,486.60.
US markets
US share markets rebounded on Friday, with investors sparked by progress on an infrastructure spending bill as well as US economic data.
President Biden signed a stop-gap bill to keep the government running to December 3.
On the stock front, shares in Merck rose 8.4% on study results for an oral COVID-19 drug
SPI futures are pointing to a 0.7% jump at the open on what will be a quiet start to October trading, but investors will be on alert for any hint of jitters in what is typically the most volatile month for stocks.
Meanwhile, US jobs figures, due Friday, will be closely watched.
US indices
- Dow Jones rose 1.4% to 34,326.46.
- S&P 500 rose 1.2% to 4,357.04.
- Nasdaq rose 0.2% to 14,566.70.
European markets
Euro stocks fell on Friday.
Technology and miners were down 1.3% and banks down 0.7%. A survey showed a slowdown of euro-zone manufacturing activity due to supply chain issues.
Consumer price inflation data for the EU for September was reported on Friday and recorded the largest rise since before the global financial crisis. The annual rate came in at 3.4%, up from 3% in August.
The major contributor to the rise was energy costs, which given the energy woes on the continent comes with little surprise.
In London trade, shares in Rio Tinto fell by 2.1% and shares in BHP fell by 2.4%.
European indices
- STOXX 600 fell 0.4% to 452.90.
- German Dax fell 0.7% to 15,156.44.
- UK FTSE fell 0.8% to 6,027.07.