Originally published by Rivkin Securities
Despite the S&P/ASX 200 falling 1.4% on Friday, together with weak European and UK markets, the Dow Jones and S&P 500 managed to have relatively uneventful sessions with the Dow climbing 0.15% to a new record high while the S&P 500 fell slightly. The US markets responded only weakly to the release of the second quarter GDP which indicated that the US economy grew by 2.6%, almost twice the growth rate of the first quarter. This brings the annualised growth for the first half of the year to approximately 1.9%, not amazing but moving forwards at least. The S&P/ASX 200 is expected to make back some of Friday’s losses today with futures prices indicating a positive open.
Earnings season on the ASX begins in earnest this week with brokers expecting headline earnings growth in the region of 15-18%. This week we will get results from Rio Tinto (AX:RIO) and Tabcorp (AX:TAH).
Also this week, the RBA will hold its monthly policy meeting at which is it expected to keep rates on hold at 1.5%. Although no changes are expected in the near future, markets are now biased towards expecting the next move to be a hike. The rising Australian dollar (now trading near US$0.80) will potentially be a point of concern for the RBA which will likely consider current levels to be too high.
Strong increases in the price of oil over the past week is no doubt bullish for oil producers with the rally fueled in large part by the substantial draw-downs in US inventories over the past several weeks. A continuation of this trend could indicate the oil market is rebalancing thanks to the production cuts by OPEC and Russia. On the other hand, oil traders will likely rapidly reverse course if inventories begin to build again. For now, though, companies like Santos (AX:STO) should hold on to their share price gains from the past couple of weeks as long as oil prices stay where they are or move higher.
Data Releases:
- Chinese Manufacturing PMI 11:00 am AEST
- Euro Flash CPI Estimate 7:00pm AEST