The morning catch up: US inflation numbers; consumer sentiment, business confidence and unemployment rate to shape local market

© Reuters. The morning catch up: US inflation numbers; consumer sentiment, business confidence and unemployment rate to shape local market

The ASX is expected to rise today. ASX 200 futures are 4 points or 0.05% higher to 7,153, as of 7:30am AEST.

If it does rise, which isn’t guaranteed, it will be a small reversal from the market's finish to the week on Friday.

The S&P/ASX 200 closed 14.3 points, or 0.2% lower on Friday at 7,156.7. The All Ordinaries also fell 0.2% and the benchmark fell 1.7% over the last five days of trading.

The market was dragged down by iron ore miners, with BHP (ASX:BHP) Group Ltd falling 1.2%, Fortescue Metals Group (ASX:ASX:FMG) shedding 2.4% and Rio Tinto Ltd (ASX:RIO) dropping 1.7%.

Another big week of data is expected this week after disappointing numbers from China, soaring oil prices, a hot US economy, inflation and bond yield headwinds all affected markets last week.

This week we can expect a potential 0.25% rate hike from the European Central Bank (ECB) and US inflation numbers.

What happened last week?

Here’s what we saw (source Commsec):

US markets

Closed slightly higher on Friday. Shares of Marathon Petroleum (NYSE:MPC), Phillips 66 (NYSE:NYSE:PSX) and Valero Energy (NYSE:NYSE:VLO) rose between 2.9% and 4.3% as oil prices continued their recent rise.

Apple shares (NASDAQ:AAPL) inched up by 0.4%. Microsoft (NASDAQ:MSFT) and Salesforce rose about 1%. Shares of supermarket conglomerate Kroger (NYSE:KR) climbed 3.1% on the back of better-than-expected earnings for the second quarter. But megacaps Nvidia and Tesla (NASDAQ:TSLA) fell more than 1%. Block shares shed 5.3% as the payments company grappled with a systems outage.

• The Dow Jones index rose by 76 points or 0.2%. For the week, the Dow finished 0.8% lower.
• The S&P 500 index lifted 0.1% but fell 1.3% for the week.
• The Nasdaq index added 13 points or 0.1% but lost 1.9% for the week.

Logged weekly losses despite gaining on Friday, as investors fretted over a worsening outlook for the economy and the trajectory of US interest rates, while the focus shifts to central bank action this week. Europe's travel and leisure sector rose by 1.4%.

Data showed German annual inflation eased from 6.5% in July to 6.4% in August (survey: 6.4%).

• The continent-wide FTSEurofirst 300 index lifted 0.2% but declined 0.7% for the week.
• In London, the UK FTSE 100 index rose by 0.5% and was up 0.2% for the week.

Were mixed against the US dollar in European and US trade.

• The Euro rose from US$1.0693 to US$1.0741 and was near US$1.0700 at the US close.
• The Aussie dollar fell from US64.13 cents to US63.71 cents and was near US63.85 cents at the US close.
• The Japanese yen eased from 147.05 yen per US dollar to JPY147.86 and was near JPY147.80 at the US close.

Global oil prices rose to a nine-month high on Friday on rising US diesel futures and worries about tight oil supplies after Saudi Arabia and Russia extended supply cuts.

• The Brent crude price rose by US73 cents or 0.8% to US$90.65 a barrel.
• The US Nymex crude price gained US64 cents or 0.7% to US$87.51 a barrel.
• For the week, both benchmarks were up over 2%.

• The copper futures price dipped by 1.2% and was down 3.5% for the week, its biggest loss in four weeks.
• The aluminium futures price fell by 0.8% on Friday and was down 2.8% for the week.
• The gold futures price rose by US20 cents or less than 0.1% to $US1942.70 an ounce on Friday. Spot gold was trading near US$1,918 an ounce at the US close. Gold fell by 1.2% over the week after gaining for two straight weeks.
• Iron ore futures slid US50 cents or 0.4% to US$116.90 a tonne on Friday after Chinese agencies warned some market players not to "deliberately exaggerate" prices for the steelmaking material. Iron ore fell by 1.1% over the week.

Wealth Within chief analyst Dale Gillham gives his views on what to expect from the ASX in the coming weeks.

“Even though the market had risen around 2.5% two weeks ago, I cautioned investors that it was best to have the mindset that the market could fall as we have seen so many times in the last three years.

“As I have said many times, just when we think the market is bullish it does the opposite. Well, this occurred and the All Ordinaries Index was down 1.5% last week. While I was expecting more volatility in the market, I was leaning to this being a fast rise rather than a sharp fall.

“I suspect we will see further falls into October and possibly back down to around the 7,000-point support level. I will say it again, I strongly recommend you have a stop loss on every stock you own in case we see further downside.”

Three things to watch for week ahead

eToro market analyst Farhan Badami shares his three things to watch in Australia in the coming days.

1. Consumer sentiment and business confidence

Westpac’s Consumer Sentiment is revealed on Tuesday. The index dipped in early August following a soft July rebound. With the RBA refusing to rule out additional rate rises in last Tuesday’s September rate meeting, consumers may continue to be cautious despite receiving a third month of consecutive rate pauses.

With inflation proving to be a stubborn beast and homeowners unlikely to experience a cut to interest rates until at least this time next year, a significant positive shift in consumer sentiment would be a surprise.

Meanwhile, NAB’s business confidence report will also be delivered on Tuesday, and the pairing of both insights will give analysts a good indicator of the overall health of the economy.

Businesses seem to be staying more optimistic than consumers, attributable to a general belief within the business community that the RBA is wrapping up its hike cycle.

However, diminished discretionary spending has led to an underwhelming earnings season in the past few weeks – especially across the category of homewares – and we may see this reflected in a less enthusiastic response from businesses this month.

2. USA’s big inflation brief

The US core inflation rate and headline inflation rate will be revealed on Wednesday across month-on-month and year-on-year categories.

This is a significant data dump, with many hoping that inflation will continue to slow so that the Fed may feel prompted to pull back on its hawkish stance.

For those playing at home, headline inflation is typically a ‘default’ reading of the consumer price index, including household essentials. Meanwhile, core inflation subtracts food and energy prices – the belief being that this allows analysts to detect longer-term economic trends without the often influence of oft-volatile food and energy prices distorting key indicators.

3. Aussie unemployment rate

August figures for Australia’s unemployment rate are due to come out end-of-week. With July’s rate just marginally higher than forecast, a steady or increased unemployment reading will likely push the RBA towards pausing rates again in October.

The Federal Government and the Reserve Bank may still be hoping for the unemployment rate to break 4% in their pursuit of a soft landing (July’s reading was 3.7%), but economists are increasingly confident that keeping the number around the 3.75% region is sustainable, especially if inflation continues to slow – and ideally fall – without significant unemployment having to act as the catalyst.

That said, the ripple effect of tightening household budgets and big businesses facing a holdover of inventory could lead to continuing redundancies among major workforces, even with the knowledge that the RBA is considering ending its tightening cycle.

What about small caps?

The S&P/ASX Small Ordinaries (XSO) finished 0.23% in the red on Friday and lost 2.26% for the week.

It has been a steady start for small cap companies this morning with solid news flow.

You can read about the following and more throughout the day.

• The board of Ionic Rare Earths Ltd (ASX:IXR, OTC:IXRRF) advised that The Hon Dr Ruth Nankabirwa Ssentamu, the Ugandan Government Minister for Energy and Mineral Development, has indicated her support for the licensing and development of IonicRE’s Makuutu Heavy Rare Earths Project in Uganda.
• Aruma Resources Ltd (ASX:AAJ) has started the next phase of drilling at the 100%-owned high-grade Salmon Gums Gold Project, in the Eastern Goldfields of Western Australia.
• Carnavale Resources Ltd (ASX:CAV) has completed an aggressive program of RC drilling at McTavish East at the Kookynie Gold Project following up on excellent, extensional high-grade gold results from previous RC drilling in fresh rock that identified high-grade gold shoots.
• Kingfisher (LON:KGF) Mining Ltd (ASX:KFM) announced additional results from its early-stage exploration targeting lithium-bearing pegmatites in the Chalba area of the highly prospective Gascoyne Province.
• Genetic Technologies Limited (ASX:GTG, NASDAQ:GENE, OTC:GNTLF) announced that the expanded geneType Multi-Risk Test is now available to order in Australia.

Read more on Proactive Investors AU

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