Banks and energy stocks led the charge on Wall St to close out the week last week, as US markets traded higher. The ASX is set to follow the upward trend in this morning’s trading.
SPI futures point to a 0.4% gain at the start of trade.
Here’s what we saw:
- The Aussie dollar fell from highs near US74.40 cents to lows near US74.00 cents and was near US74.20 cents at the US close.
- Global oil prices rose by around 1% on Friday: the White House saying it will lift travel restrictions may have had a big role to play in oil’s rise.
- Brent crude price lifted by US86 cents or 1% to US$84.86 a barrel. Over the week Brent rose by 3%.
- Base metal prices also jumped higher on Friday, rising between 1.5-8.2% with zinc up the most.
- Over the week prices soared with zinc up 22.3% and copper up 12.3%.
- The gold futures price fell by US$29.60 or 1.6% to U$1,768.30 an ounce.
- Spot gold was trading near US$1,767 an ounce at the US close. Over the week gold rose by US$10.90 or 0.6%.
- Iron ore fell by US55 cents or 0.4% to US$125.45 a tonne, but it wasn’t all bad for iron ore last week as it rose by US40 cents or 0.3%.
Australian markets
The best-performing sectors last week were Materials and Consumer Staples, both up over 1%. Healthcare was up just under 1%.
The worst-performing sectors include Financials and Utilities, both down over 1%. Industrials was down just under 1%.
The best performers in the S&P/ASX top 100 stocks include a2 Milk up over 13% and South 32 (LSE:S32) and Alumina both up over 6%.
The worst-performing stocks were Star Entertainment Group down over 18% with a potential inquiry into its behaviour to come. Ansell was down over 5% and Washington Soul Patterson dropped over 4%.
What's next for the Australian share market?
As we do each week, we asked Wealth Within founder and analyst Dale Gillham about his thoughts on the Australian market.
“The Australian stock market continues to exhibit indecision because while it was just slightly in positive territory last week, it has ranged over 1.5% in price as the bulls and bears continue their battle for dominance.
"The reason why our market has not really moved is because the Materials and Financial sectors are moving in opposite directions, as Materials is up 1.6% at the time of writing while Financials is down 1.4%.
“I believe this indecision is only short term and the market should pick a direction very soon, which I suspect will be down given that the rise in the Materials sector this week is not being driven by the big stocks like BHP, RIO and FMG, as they have been rather flat. For the market to fall, the Materials sector needs to fall away and if the big miners start to fall, then they are likely to take the sector and the market with them.
“I still believe the low on the Australian stock market will occur below 7,200 points, which I expect any time in the next few weeks. Right now, it is time to get ready to buy because once the market settles into a new uptrend there will be many good buying opportunities.”
NSW and Victoria reopening
The Australian economy is due for a huge shot in the arm (no pun) as NSW opens fully today and Victoria gets set to end its lockdown on Friday.
This should have a positive effect on the markets, with certain sectors set to begin their recovery.
“Australian business conditions PMIs for October (Friday) are likely to bounce as reopening in NSW and the prospect of reopening in Victoria boosts confidence,” writes AMP Capital’s head of investment strategy and chief economist Shane Oliver.
Australian indices
- ASX 200 rose 0.69% to 7,362.00.
- ASX24 futures rose 0.4% to 7,364.
- S&P/ASX Small Ordinaries rose 0.70%% to 3,526.40.
- All Ordinaries was up 0.76% to 7,674.20.
US markets
The Dow finished up 1.1% on Friday and the Nasdaq rose 0.5%. It was a good week overall, with stocks notching their best week since July on the back of solid corporate earnings and a surprise increase in retail sales from companies more likely to benefit from an economic rebound.
The US economy looks to be recovering well in a post-pandemic world, with retail sales increasing 0.7% in September.
Travel-related stocks were on the rise after the White House announced the US will reopen its borders on November 8 to foreign visitors fully vaccinated against COVID-19.
Bankrate (NYSE:RATE) released its Third-Quarter Economic Indicator survey which suggests over the next 12 to 18 months, risks facing the US economy are tilted toward the downside. However, analysts contributing to the survey did have mixed views.
“It is interesting that many of the experts express concern about the potential for negative developments, including those which would be essentially ‘manmade,’ either in the sense of an ineffective response to the still-present COVID-19 pandemic or a policy mistake among elected officials in Washington,” said Bankrate senior economic analyst and Washington bureau chief Mark Hamrick.
Navy Federal Credit Union corporate economist Robert Frick said, “The $US1.5 trillion in excess savings from stimulus and personal savings will keep consumer spending strong, which is 70% of the economy.
“And while the employment situation may not improve as strongly as forecasted, wages and salaries overall will keep increasing, adding more to consumer spending power.”
Shares in Goldman Sachs (NYSE:GS) rose 3.8% in response to a strong earnings result. Shares in Alcoa (NYSE:AA) rose 15.2% after the aluminium producer announced a US$500 million buyback and said it would pay a dividend.
US indices
- Dow Jones rose 1.1% to 35,294.76.
- S&P 500 rose 0.8% to 4,471.37.
- Nasdaq rose 0.5% to 14,897.34.
European markets
Europe finished the week strongly as well.
The pan-European STOXX 600 index rose by 0.7%, a 2.6% gain for the week and the best weekly gain in seven months.
Banks were on top of the heap, rising 1.8%, following better-than-expected results from US lenders over the week.
European banks recovered all their pandemic losses and were trading at pre-pandemic levels on Friday.
“A renewed focus on the bottom-up news has helped global equities over the last couple of sessions, and results from the US banking sector delivered another significant boost to indices overnight,” said Peel Hunt analyst Ian Williams.
In London trade shares in Rio Tinto fell by 1.4% after it cut its 2021 iron ore shipments forecast. Shares in BHP fell 0.1%.
European indices
- STOXX 600 rose 0.74% to 469.39.
- German Dax rose 0.8% to 15,587.36.
- UK FTSE rose 0.4% to 7,234.03.