The ASX is expected to start the week on a high. ASX200 futures are trading 20 points higher, up 0.28% as of 8:30 am AEST.
A good start will be a turnaround from last week, when the ASX200 finished 32 points (-0.46%), at 7,115, on concerns around the Chinese economy, the earnings outlook and weakness in the Australian dollar.
The worst-performing sectors were Health Care (-2.73%), Consumer Staples (-2.53%) and Utilities (-2.25%). The Consumer Discretionary (+1.78%), Real Estate (0.34%) and Financial (0.05%) sectors were the only three sectors to close higher.
Investors will have a few things to look out for this week. Retail sales are released today, with a speech by incoming RBA Governor Michele Bullock scheduled for Tuesday titled ‘Climate Change and Central Banks’. The monthly CPI Indicator is delivered on Wednesday.
We are also in the home straight for earnings season and can expect to see reports Appen, Fortescue (ASX:FMG), Mineral Resources, ZIP, Flight Centre (ASX:FLT) and Harvey Norman.
A positive start locally follows on from a strong finish to the week on Wall St.
A balanced Jerome Powell speech at Jackson Hole saw US stocks mostly higher. Powell did not flag upside risks to current rates, while 2024 rate cut expectations remain.
"Given how far we have come at upcoming meetings, we are in a position to proceed carefully as we assess the incoming data and the evolving outlook and risks," Powell said.
“We see the current stance of policy as restrictive, putting downward pressure on economic activity, hiring and inflation ... But we cannot identify with certainty, the neutral rate of interest and thus there's always uncertainty about the precise size level of monetary policy restraint.
“As is often the case, we are navigating by the stars under cloudy skies. In such circumstances, risk management considerations are critical ... We will proceed carefully as we decide ... We will keep at it until the job is done."
What happened last week?
Here’s what we saw (source Commsec):
US markets
Rose on Friday after US Fed chair Jerome Powell said officials “will proceed carefully” on whether to raise interest rates again while signalling policy will remain tighter for longer.
Shares of toymaker Hasbro (NASDAQ:NASDAQ:HAS) jumped 5.7% after broker Stifel lifted the stock's price target. Gap shares rose 7.2% after it beat second-quarter profit estimates, while Nordstrom (NYSE:JWN) fell 7.7% after the department store chain left its forecasts unchanged.
- The Dow Jones index rose by 247.5 points or 0.7%. For the week, the Dow fell 0.4%.
- The S&P 500 index also gained 0.7%. For the week the S&P 500 gained 0.8%.
- The Nasdaq index added 127 points or 0.9%, up 2.3% for the week.
- Both the S&P 500 and NASDAQ snapped a three-week losing streak.
Closed little changed on Friday. At Jackson Hole, European Central Bank president Christine Lagarde said the bank would set borrowing costs as high as needed and leave them there for as long as it took to bring inflation back to its goal.
Germany's Ifo institute said its business climate index stood at 85.7 in August, down from 87.4 in July (survey: 86.8). Watches of Switzerland shares slid 20.9% after Rolex's purchase of retailer Bucherer.
- The continent-wide FTSEurofirst 300 index was flat on Friday but rose 0.8% for the week.
- The UK FTSE 100 index edged higher by 0.1% on Friday and rose 1.1% over the week.
Were weaker against the US dollar in European and US trade.
- The Euro fell from US$1.0838 to US$1.0765 and was near US$1.0800 at the US close.
- The Aussie dollar dipped from US64.37 cents to US63.81 cents and was near US64.00 cents at the US close.
- The Japanese yen eased from 145.77 yen per US dollar to JPY146.60 and was near JPY146.40 at the US close.
Global oil prices climbed about 1% on Friday. US diesel prices soared, the number of US oil rigs dropped and a fire broke out at Marathon Petroleum (NYSE:MPC)'s 596,000 barrel per day refinery in Garyville, Louisiana.
- The Brent crude price rose by US$1.12 or 1.3% to US$84.48 a barrel.
- The US Nymex crude price gained US78 cents or 1% to US$79.83 a barrel.
- For the week, Brent declined 0.4% and the Nymex lost 1.7%.
- The copper futures price slid 0.2% and the aluminium futures price shed 0.1%.
- Copper gained 1.6% with aluminium up 1.3% over the week.
- The gold futures price fell by US$7.20 or 0.4% to US$1,939.90 an ounce on Friday.
- Spot gold was trading near US$1,914 an ounce at the US close. Gold logged its first weekly gain, up 1.2%, after four straight weeks of losses.
- Iron ore futures added US39 cents or 0.4% to US$108.21 a tonne on Friday as Chinese steel mills began to restock ahead of the construction season. Iron ore gained 2% for the week.
eToro market analyst Farhan Badami shares three things to watch in Australia in the coming days.
1. Economic health indicators
This week features a significant run of economic health indicators, including the monthly Consumer Price Index (CPI) and Commodity Prices reports, as well as monthly retail sales and home loans.
With the impact of the RBA’s mammoth rate rise run finally starting to surface in consumer behaviour data, all eyes will be on these crucial insights to determine whether any of them may influence the RBA’s interest rate decision next week.
As it stands, the broad market is tipping another pause from the central bank but if CPI indicators come in higher than expected – last month’s number was 5.4% – this could easily change outlooks.
2. Construction woes set to continue
On Wednesday, the ABS will release its Construction Work Done report. Released quarterly, it’s a vital indicator of the construction sector’s overall health, which shapes our understanding of the broader economy, population and employment. Generally, it also helps analysts to forecast the GDP data released in the following days to weeks.
As always, construction industry performance that exceeds the forecasted expectations is a good sign for economic health. However, Australian construction companies are collapsing at a record rate presently, dragged down by exceptionally high demand, significant labour shortages and the ripples of the pandemic continuing to affect materials supply.
While there are signs it is easing, the last 18 months have been historically bad and the last few months in particular, have been punctuated by a series of notable insolvencies.
Adding to the pain, on Wednesday last week, the Housing Industry Association (HIA) reported a 2.4% July decline in new home sales, bundled with a forecast for a weak 2024.
In short, all indicators suggest that this Wednesday’s release of data may not be the bastion of hope economists are seeking.
3. Michele Bullock’s last speech as deputy
On Tuesday night, Michele Bullock is expected to front an audience at the Australian National University in Canberra in what will be her last speech as RBA Deputy Governor.
Economists will be listening carefully as she addresses the environmental implications for the economy, including the transition to net zero. While there aren’t any surprises anticipated, traders will be paying close attention to any subtle clues about future monetary policy from the impending RBA head.
On September 18, Bullock will begin her seven-year term as the first female Governor of the RBA. She has a hard road ahead of her given the difficult economic outlook in Australia right now; most critically, inflation still persists despite a year-long hawkish tilt by her predecessor, Philip Lowe.
A difficult hand to manage at the best of times, Bullock will also be expected to balance her advocacy for slowing wage growth with turmoil within the RBA, where a 10.5% pay rise was rejected as inadequate by staff and unions earlier this week.
Given Tuesday’s seminar is open for free registration, one might imagine the closing Q&A may produce significant inquiries as to what Australians can expect around rate policy in the coming months. Whether these questions result in satisfactory insights, given Lowe will still be in charge when the RBA makes their September rate call, is another matter.
What about small caps?
The S&P/ASX Small Ordinaries (XSO) finished the week 0.99% lower at 2,809,00. Over the course of the week, it was 0.06% higher.
There has been a steady flow of news this morning. You can read about the following and more throughout the day.