The ASX is expected to rally today ahead of tomorrow’s Reserve Bank of Australia’s (RBA) rate decision.
ASX 200 futures are trading 65 points higher, up 0.91% as of 8:20 am AEST.
The ASX200 finished 32 points (0.46%) higher last week at 7,073, supported by a downside surprise in Australian inflation data and tailwinds from Wall Street.
The best-performing sectors were the IT (+2.30%), Health Care (+2.25%) and Real Estate (1.16%) sectors. The Utilities (-2.51%), Energy (-2.34%) and Consumer Staples (-0.25%) sectors were the main drags.
“This week, the focus locally will be on Tuesday's RBA interest rate meeting and Wednesday's Q4 GDP data," IG Markets analyst Tony Sycamore said.
"Last week’s cooler-than-expected monthly CPI indicator should see the RBA keep rates on hold in December. However sticky ‘homegrown’ services inflation will ensure a tightening bias is retained with a rate hike in February hinging on the outcome of the December quarter (Q4) inflation due for release in late January.
“A rally on the local bourse would follow Friday’s S&P 500 rally, which closed on a 2023 high amid growing optimism the Fed could cut interest rates as soon as March 2024.
“US stock markets kicked off a new month in style as fixed income and equity markets reacted to the more dovish elements within Fed chair Powell's speech, that included rates being ‘well into restrictive territory’,” Sycamore said.
What happened last week?
Here’s what we saw (source Commsec):
US markets
Rallied on Friday amid growing investor optimism the US central bank was done raising interest rates and could begin to cut them next year as inflation cools.
Shares got a boost after Federal Reserve chair Jerome Powell vowed to move "carefully" on rates, describing the risks of going too far with tightening as "more balanced" with risks of not controlling inflation.
Walgreens Boots Alliance (NASDAQ:WBA), Nike (NYSE:NKE) and Salesforce rose between 3.2% and 4.3%, leading the Dow Jones index to its highest close since January 2022.
Ulta Beauty (NASDAQ:ULTA) jumped 10.8% after the cosmetics company reported forecast-beating comparable sales growth in the third quarter.
Paramount Global (NASDAQ:PARA) soared 9.8% on reports that the media company and Apple (NASDAQ:AAPL) had started talks about bundling their streaming services at a discount.
Streaming giant Warner Bros. Discovery popped 8.4%. Pfizer (NYSE:PFE) dipped 5.1% after its obesity drug trial was dropped.
- The Dow Jones index rose by 295 points or 0.8%.
- The S&P 500 index gained 0.6%.
- The Nasdaq index added 79 points or 0.6%.
- For the week, the Dow rose 2.4%, the S&P 500 rallied 0.8% and the Nasdaq gained 0.4%, all up for a fifth consecutive week.
European markets
Climbed on Friday, with mining stocks leading gains, up 4.2%, after China's manufacturing sector recorded an unexpected expansion last month.
Anglo-American and Antofagasta (LON:ANTO) jumped 7.9% and 6.2%, respectively. HCOB's eurozone manufacturing purchasing managers' index (PMI) rose from 43.1 in October to 44.2 in November (survey: 43.8).
- The continent-wide FTSEurofirst 300 index rose by 1% and was up 1.3% over the week.
- In London, the UK FTSE 100 index also added 1% and gained 0.6% for the week.
Currencies
Were mixed against the US dollar in European and US trade.
- The Euro fell from US$1.0911 to US$1.0831 and was near US$1.0880 at the US close.
- The Aussie dollar lifted from US65.98 cents to US66.75 cents and was near US66.70 cents at the US close.
- The Japanese yen rose from 148.32 yen per US dollar to JPY146.67 and was near JPY146.80 at the US close.
Commodities
Global oil prices slumped on Friday on investor scepticism about the depth of OPEC+ supply cuts and concern about sluggish global factory activity.
- The Brent crude price fell by US$1.98 or 2.4% to US$78.88 a barrel.
- The US Nymex crude price shed US$1.89 or 2.5% to $74.07 a barrel.
- For the week, Brent posted a decline of 2.1%, while the Nymex lost 1.9%.
Base metal prices climbed on Friday due to better-than-expected manufacturing data from China.
- Copper futures gained 2.1% and were up 3% for the week.
- Aluminium futures added 0.7% but lost 1.2% over the week.
- The gold futures price rose by US$32.50 or 1.6% to an all-time high of US$2,089.70 an ounce as Fed Chair Powell's comments cemented peak rates bets.
- Spot gold was trading near US$2,071 an ounce at the US close. Gold jumped 4.3% over the week.
- Iron ore futures fell by US67 cents or 0.5% to US$130.46 a tonne as Beijing continued to intervene in the market to regulate prices. For the week, prices rose by 0.2%.
What's next for Australian stock market?
Wealth Within chief analyst Dale Gillham looks ahead to see what we can expect from the market in the coming days and weeks as we head into the quiet season.
“Last followed what seems to be normal behaviour for our market where it trades in one direction early in the week only to reverse direction later in the week. This is exactly what occurred, given that the market initially fell 0.7% before rising nearly 1.5%.
“In the past couple of weeks, I have mentioned that I was more positive yet still cautious as we needed to see the All Ordinaries Index rise into the coming week and beyond. The good news is that this is what seems to be occurring right now.
“That said, there are two things that needed to occur for me to be more positive. The first is that the market needed to close high on Friday, and secondly, the price needs to continue to rise into this week above 7,334 points. If the market fails to achieve both points, we need to continue to be cautious for a little longer and avoid the temptation of FOMO.
“One thing I know for sure is that the stock market will teach you patience. Unfortunately, those who have not been so patient have probably lost money or been highly challenged, especially in recent times.
"If the market does rise into next week, your patience will be well rewarded as there are many stocks presenting some great opportunities in the medium term.”
What about small caps?
The S&P/ASX Small Ordinaries closed 0.058% down on Friday but was up 1.98% for the week.
It’s a slow morning for news so far, but you can read about the following and more throughout the day.