Don’t hold your breath, but the ASX could start in the green today although a flat start to the week is far more likely.
ASX 200 futures are trading 5 points higher, up 0.06% as of 8:20 am AEDT.
The ASX200 finished 9 points (0.12%) higher last week at 7,498.
The upward trend was marked by a softer-than-expected Australian inflation print for November supported the local market.
As is always the case in Australia, we are unlikely to see full momentum on the market until after the summer holidays and kids go back to school in late January.
The best-performing sectors last week were the IT (+2.76%), Consumer Discretionary (1.92%) and Real Estate (+1.92%) sectors.
Utilities (-2.83%), Materials (-1.83%), and Consumer Staples (-1.27%) sectors were the main drags.
“This week, the key economic events in Australia will be Thursday's job report," IG Markets analyst Tony Sycamore writes.
"The Australian economy added 61,500 jobs in November vs the 11,500 expected. The unemployment rate rose to 3.9% from 3.8%, as the participation rate surged to a record high of 67.2% from 67%.
"This month (November), the market is looking for a 15,000 rise in employment and for the unemployment rate to remain unchanged at 3.9%. The participation rate is expected to ease to 67.1% from 67.2%.
“Ahead of the jobs report, there are two 25 bp RBA rate cuts priced into the Australian rates market, with a first-rate cut priced for June and a second in December, which would take the cash rate back to 3.60% by year-end.
"If the unemployment rate ticks up to 4% or above, it may see a third rate cut priced into the Australian rates curve for 2024.”
Over on Wall St, US equity markets rebounded, supported by increasingly aggressive expectations of Fed rate cuts.
“Following Friday night's softer-than-expected PPI data (-0.1% vs 0.1% exp), 2-year yields finished the week 23bp lower at 4.15%. There is now an 80% chance of a Fed rate cut priced for March and a total of 167 bp of rate cuts priced for 2024. Encouragement enough for the Nasdaq to finish the week 3.23% higher, the S&P500 1.84% higher, and the Dow Jones 0.34% higher,” Sycamore said.
What happened last week?
Here’s what we saw (source Commsec)
North America
The S&P 500 overcame big declines in airline stocks and shares of companies that rely on discretionary spending Friday to inch closer to a new all-time high.
The benchmark stock index ended Friday less than 0.1% higher, within 0.3% of a record high that has stood for more than two years. The tech-heavy Nasdaq Composite also added less than 0.1%. The Dow Jones Industrial Average declined 0.3%, or 118 points.
Each index still ended the week higher, after declining in the first week of January. Many analysts believe the market's January performance sets the tone for the rest of the year.
"Our concern is with market valuations, especially right at record highs, when the economy is not as strong as it was," said Jerry Braakman, chief investment officer at First American Trust.
Asia
Chinese shares closed lower as deflation concerns deepened after official data showed domestic CPI fell for a third straight month in December. China's consistently weak core inflation, which strips out volatile energy and food prices, reflects sluggish domestic demand growth due to the ongoing property downturn and stressed labour market.
The benchmark Shanghai Composite Index closed 0.2% lower at 2,881.98, the Shenzhen Composite Index declined 0.6% and the tech-heavy ChiNext Price Index fell 0.9%.
Hong Kong shares ended lower amid deepening concerns of deflation in China. The Hang Seng Index fell 0.35% to 16,244.58, taking the stock benchmark 1.8% lower for the week. The Hang Seng Tech Index fell 0.9%. JD.com and Xiaomi lost 1.6% and 1.2%, respectively.
Japan's Nikkei Stock Average closed 1.5% higher at 35,577.11, its fourth consecutive session gain and a fresh near 34-year high. The index gained 6.6% for the week, making it one of the top-performing markets so far this year.
India's benchmark Sensex rose 1.2% to close at a record high of 72,568.45 amid investor optimism spurred by solid 3Q FY 2024 results and earnings guidance from some of the country's major IT companies.
Europe
European markets rose, with defence and aerospace stock gains outweighing losses for airline and luxury goods shares. The FTSE 100 closed up 0.6% Friday driven by defense and aerospace companies such as Rolls-Royce (LON:RR) and BAE Systems (LON:BAES) after heightened tensions in the Middle East.
"Rising oil prices following the bombing of Houthi military targets by the US and UK in Yemen and a better-than-forecast expansion of month-on-month UK GDP growth helped the FTSE 100 to a positive close," IG analyst Axel Rudolph said in a note.
The small cap scene
The S&P/ASX Small Ordinaries finished Friday 0.16% higher and was 1.48% higher for the week finishing at 2,891.00.
We have seen more news this morning than has been released over the previous couple of weeks.
You can read about the following and more on Proactive throughout the day: