As much of Australia mourns the passing of Queen Elizabeth, it seems the sad occasion will have little impact on the markets.
ASX Futures (SPI 200) imply the ASX 200 will be 79 points higher, up 1.14%, following the upward closing trend of US and UK markets last week.
Despite the Queen’s passing, London’s blue-chip index closed 1.2% higher at 7,351 points, with mining companies leading the way thanks to a softening dollar.
“UK investors will no doubt be feeling somewhat conflicted given the current events and the BoE has followed the lead set by other institutions by postponing its rate increase," Chris Beauchamp, chief market analyst at online trading platform IG wrote on Friday.
"But otherwise it is very much business as usual and next week will still see a significant focus on the UK with CPI and employment data, although it is unlikely to provide a real change in trend for sterling, which still looks to be on a downward path against the dollar.”
On Wall St, a broad-based rally extended its winning streak for a third straight day, however, the market is still determining whether it’s just another bear market rally or the market hit bottom.
"Although we don’t know if June 16 is officially the low or not, there could be a lot of opportunity for bulls over the coming year," Carson Investment Research noted.
Fundstrat Global’s head of technical strategy Mark Newton was also bullish, saying, “The upside follow-through looks likely to extend into next Tuesday/Wednesday and still looks quite premature to fade. While this rally likely gets up to 4,125-50 at a minimum, one cannot rule out a larger push higher if CPI reports show weakening headline inflation on falling gas prices.
“However, I don’t expect this rally to go on non-stop throughout the month and longer-term investors might decide to hold out and wait for weakness in the back half of September before buying dips in October.”
The S&P 500 rose 61.18 points, or 1.5%, to 4,067.36, while the Dow Jones Industrial Average climbed 377.19 points, or 1.2%, to 32,151.71. The Nasdaq Composite advanced 250.18 points, or 2.1%, to 12,112.31. The indexes posted weekly gains of 3.7%, 2.7%, 3.1%, according to Dow Jones Market Data.
Analysts described the equity market's advance as a technical bounce off of oversold levels, while the dollar retreating from a 20-year high helped buoy sentiment.
Here’s what we saw (source Commsec):
- The Euro fell from highs near US$1.0109 to lows near US$1.0031 and was near US$1.0085 at the US close.
- The Aussie dollar rose from lows near US68.20 cents to highs near US68.75 cents and was near US68.45 cents at the US close.
- The Japanese yen firmed from near 143.13 yen per US dollar to JPY141.51 and was near JPY142.50 at the US close.
- Global oil prices rose by 4% on Friday, supported by a softer US dollar and Russian threats to halt oil and gas exports. The Brent crude oil price rose by US$3.69 or 4.1% to US$92.84 a barrel. The US Nymex crude oil price lifted by US$3.25 or 3.9% to US$86.79 a barrel. Over the week, Brent fell by US18 cents or 0.2% and the US Nymex dipped US8 cents or 0.1%.
- Base metals were mostly higher on Friday as a weaker US dollar and concerns over supply constraints boosted sentiment.
- Nickel gained 5.7% but tin fell by 0.8%. For the week, nickel surged 12.1% and copper lifted 3%, but aluminium fell 1%.
- The gold futures price rose by US$8.40 an ounce or 0.5% to US$1,728.60 an ounce. Spot gold was trading near US$1,716 an ounce at the US close. Over the week, gold lifted by US$6.00 an ounce or 0.3%.
- Iron ore futures rose by US$2.14 or 2.1% to US$102.23 a tonne. For the week, iron ore gained US$6.89 a tonne or 7.2% as the onset of the peak construction season in China bolstered sentiment.
What’s next for Australian market
“As expected, the All Ordinaries Index continued to fall, confirming a third consecutive week down with the index falling almost 6% since August 16 to 6,947 points. Right now, I believe the down move may be over given that the market experienced a strong rise of 106 points. With Friday trading up, then the likelihood the down move is over will increase," Wealth Within founder and chief analyst Dale Gillham said.
“I mentioned last week that I believed the market would most likely find support around 7,000 points and I still believe this given what occurred this week. If the market has bottomed, as I suspect, then it will move up over the next four to eight weeks to erode most of the losses experienced this year. We may even see it challenge the all-time high of 7,956 points set back in January of this year.
“Before you get too excited, the low is not yet confirmed and we still need to assume the market will fall further until it confirms otherwise. We will know whether this is the case in the next few weeks, so I recommend investors sit tight until we can confirm a direction.”
BoE holds off on meeting
With England feeling the death of the Queen the most, the Bank of England postponed its monthly meeting. “In light of the period of national mourning now being observed in the United Kingdom, the September 2022 meeting of the Monetary Policy Committee has been postponed for a period of one week. The committee’s decision will be announced at 12pm on September 22.”
That decision is likely to be another rate rise, with economists predicting a hike of anywhere between 0.5% and 0.75%.
“The bad news keeps coming, particularly for Europe,” Oxford Economics’ Ben May said. “The further surge in gas prices along with uncertainty about future supply from Russia leaves most of Europe on the cusp of a recession.”
Oxford has cut its “eurozone and UK GDP forecasts for 2023 and expects only slightly positive growth in 2023.
“A deeper downturn is possible if gas prices continue to rise or energy rationing is required. But more substantial government support to limit the near-term pain and reduce uncertainty about prices and supply in the long term could trigger upside surprises,” May said.