The ASX clawed back some losses at close of market on Friday but will start the new week in the red as geopolitical issues continue to unsettle markets.
It wasn’t all bad news for the local market last week.
The S&P/ASX 200 closed 40 points lower, down -0.56% on Friday, but finished the week up 1.4%.
Most sectors finished in the red led by Tech and Real Estate stocks.
This morning, ASX 200 futures are trading 30 points lower, down 0.43% as of 8:30 am AEDT.
“This week, the key events on the local calendar are the October RBA Meeting Minutes and the September Labour Force report. The market is looking for a +25,000 rise in employment and for the unemployment rate to remain stable at 3.7%. The participation rate is expected to remain unchanged at 67.0%,” IG Markets analyst Tony Sycamore said.
In the US, last week the S&P 500 and Nasdaq sold off amid weakness in growth sectors like tech and discretionary.
Energy stocks did rally amid a spike in gas and oil prices.
All eyes will be on the upcoming reporting season, which will be kicked off by major US banks.
What happened last week?
Here’s what we saw (source Commsec):
US markets
Were mixed on Friday as investor concerns about deteriorating US consumer sentiment data and the Middle East conflict overshadowed upbeat third quarter earnings from US banks. Shares in JPMorgan Chase (NYSE:JPM) and Wells Fargo (NYSE:WFC) rose between 1.5% and 3.1% after their quarterly profits beat analysts' estimates with help from higher interest rates. But Citigroup (NYSE:C) lost steam, ending down 0.2%. UnitedHealth (NYSE:UNH) gained 2.6% after beating third-quarter profit estimates. Dollar General (NYSE:DG) shares jumped 9.2% after the discount store retailer brought back former CEO Todd Vasos. BlackRock (NYSE:BLK) shares fell 1.3% after posting a sharp drop in quarterly net inflows. Boeing (NYSE:BA) slid 3.3% after the plane maker and Spirit AeroSystems (-1.6%) expanded the scope of their ongoing inspections of a production defect affecting 737 Max 8 aircraft.
- The Dow Jones index rose by 39 points or 0.1%.
- The S&P 500 index lost 0.5%.
- The Nasdaq index dropped 167 points or 1.2%.
- For the week, the Dow advanced 0.8%, the S&P 500 lifted 0.5% but the Nasdaq was down 0.2%.
European markets
Fell on Friday with technology and travel & leisure stocks leading losses, down between 2.3% and 2.5%. But energy shares rose 1.2%, hitting a nine-year high as oil prices spiked after the US tightened its sanctions program against Russian crude exports, raising supply concerns. European Central Bank President Christine Lagarde said the central bank remains ready to tighten policy further if that becomes necessary.
- The continent-wide FTSEurofirst 300 index fell by 0.9%.
- The UK FTSE 100 index lost 0.6%.
- The indexes were up 1.2% and 1.4%, respectively over the week.
Currencies
Were mixed against the US dollar in European and US trade.
- The Euro fell from US$1.0557 to US$1.0494 and was near US$1.0510 at the US close.
- The Aussie dollar slid from US63.29 cents to US62.86 cents and was near US62.90 cents at the US close.
- The Japanese yen firmed from 149.78 yen per US dollar to JPY149.45 and was near JPY149.55 at the US close.
Commodities
Global oil prices leapt nearly 6% on Friday. Both benchmarks posted their biggest daily gains since April as investors priced in the possibility that the conflict in the Middle East could widen as Israel began ground raids inside the Gaza Strip.
- The Brent crude price rose by US$4.89 or 5.7% to US$90.89 a barrel.
- The US Nymex crude price gained US$4.78 or 5.8% to US$87.69 a barrel.
- Brent soared 7.5% for the week, its biggest increase since February. The Nymex jumped 5.9%.
Base metal prices fell on Friday.
- The copper futures price shed 0.4% and the aluminium futures price slid 0.2%. For the week, copper lost 1.2% with aluminium down 2.1%.
- The gold futures price rose by US$58.50 or 3.1% to US$1,941.50 an ounce on Friday. Spot gold was trading near US$1,932 an ounce at the US close. Gold rose by 5.2% for the week, the biggest gain in seven months, on safe-haven demand as the Middle East conflict intensified.
- On Friday, iron ore futures rose by US$1.15 or 1% to US$118.57 a tonne. The steel-making ingredient was up 0.7% over the week, despite worries about Chinese demand.
What's next for the Australian stock market?
Wealth Within chief analyst Dale Gillham gives his thoughts on what the market may do in the coming weeks.
"In a stark turnaround from previous weeks, the All Ordinaries Index rose strongly up over 2%, with the top 20 stocks leading the charge. When markets turn you will generally see these big stocks lead as they will start heading down near market peaks and rise near market bottoms, which is why I strongly recommend investors always keep an eye on them.
"While the market seems to be finding support, this is not confirmed and as I mentioned the week before last, nor is it guaranteed. The All Ordinaries Index closed higher in the six days to Friday and was up over 3% on the low of October 4, 2023. Given this, I would expect it to fall away for a few days to test the low and in doing so give us a strong indication that the down move the market has been in since July is now over. While it is possible that we may see further falls below the 7,000-point support level, I do believe the move down has finished and is very close to being confirmed.
"While the market is looking better, we are not out of the woods just yet, so patience is still the best strategy as there will be plenty of time to profit when we can confirm the direction of the market."
Three things to watch for the week ahead
Josh Gilbert, Market Analyst at eToro, shares his three things to watch in Australia in the coming days.
1. Rate call minutes
On Monday, the RBA’s Meeting Minutes from the latest rate call will be published. With the RBA delivering a fourth consecutive pause, it’s unlikely we’ll see a significant change of tack in its newest statement. RBA assistant governor Christopher Kent reaffirmed in an address to Bloomberg this week that some further tightening may be required, but he also stated that the lagging impact of this year’s significant run of consecutive rate increases are still yet to be felt. Chris Kent, the RBA’s assistant governor for financial markets, also indicated that heightened home loan repayments are now having their intended impact of reducing household spending. Essentially, the RBA leadership team sees inflation heading back towards target levels, suggesting a bias for keeping rates on hold for the time being.
2. Australian unemployment
On the topic of the RBA, another major piece of its economic puzzle will fall into place on Thursday with the monthly AU unemployment figures.
Last month’s figures came in at 3.7%, and given the RBA wants to see signs the labour market is cooling, any pick-up above 3.7% will reaffirm the view that the RBA will remain on hold for the foreseeable future. Conversely, a drop in unemployment gives the RBA a sensible reason to hike again, particularly if the Q3 CPI is hotter than expected.
3. China GDP
More bad news is forecast for the Chinese economy on Wednesday, with the nation’s GDP expected to slow to 4.4% from a position of 6.3% in Q2.
China originally set a GDP growth target of around 5% for the year and this will likely remain their focus. However, we’ve seen a very cautious approach to launching any substantial stimulus measures, even despite mounting pressure from investors and key industry.
Additional data points due to be released today may provide greater insight into the path ahead for our biggest trading partner but with the country’s GDP continuing to slide backwards and growth targets unwavering, we may see more significant economic measures announced before year’s end.
What about small caps?
The S&P/ASX Small Ordinaries (XSO) finished 1.22% down, but was up 1.81% for the week.
It has been a slow start on the news front. You can read about the following and more throughout the day.