The local market finished higher on Friday and the ASX is expected to inch higher again today. However, this week will see a subdued start ahead of ‘the race that stops the nation’ and the Reserve Bank of Australia (RBA)’s rates decision tomorrow afternoon.
ASX futures finished just 14 points (0.2%) higher on Friday.
The best-performing sectors last week were the Real Estate (6.88%), IT (4.51%) and Healthcare sectors 4.30%). On the flipside, Utilities (-4.63%), Energy (-3.50%) and Consumer Staples (-0.12%) sectors finished the week in negative territory.
IG Markets analyst Tony Sycamore said, “The key economic event in Australia this week will be Tuesday's RBA Interest Rate meeting. Currently, the rates market is assigning a 50% probability of a 25bp rate hike from the RBA to 4.35%.
"Given the political debate around whether Q3 inflation data represented a 'material' change, it will be a close call. For the record, we expect the RBA to raise rates by 25bp on Tuesday.”
In the US, the S&P 500 marked its best weekly performance since November 2022.
“US equity markets ripped higher and bond yields extended their post-FOMC sell-off after Friday's soft non-farm payrolls report," Sycamore said
"Within the details, the US economy added 150,000 jobs in October, falling from 336,000 in September. The unemployment rate increased to 3.9%, the highest since January 2022, and wage growth increased by 0.2% over the month, less than the 0.3% expected.
“Combined with last week's soft ISM data (Manufacturing and Services) and more cautious FOMC, the rates market is pricing in a 25bp rate cut in June next year, with 100bp of rate cuts priced in for 2024.”
What happened last week?
Here’s what we saw (source Commsec):
US markets
Rallied on Friday as signals of cooling in both the US labour market and services sector reinforced the idea that the US Federal Reserve may be done with interest rate hikes.
A big fall in US government bond yields and the release of mostly solid earnings reports also boosted sentiment.
Fintech firm Block jumped 10.7% after raising its annual adjusted profit forecast. Expedia (NASDAQ:EXPE)shares surged 18.8%, a day after the vacation booking platform delivered stronger-than-expected earnings for the third quarter.
Media conglomerate Paramount Global climbed 15.4% after reporting a third-quarter earnings beat. But Apple (NASDAQ:AAPL) fell by 0.5% on the day after its sales forecast for the holiday quarter was short of expectations.
- The Dow Jones index rose by 222 points or 0.7%
- The S&P 500 index gained 0.9%.
- The Nasdaq index added 184 points or 1.4%.
- For the week, the S&P 500 gained 5.9% for its biggest gain since November 2022 and the Nasdaq added 6.6%, also showing its biggest gain since November 2022. The Dow Jones showed a weekly gain of 5.1%, its biggest since late October 2022.
European markets
Were mixed on Friday.
Rate-sensitive real estate stocks rose by 3.1% as signs of an end to monetary policy tightening by major central banks boosted sentiment. Energy shares fell 2.2%, tracking oil prices lower.
- The continent-wide FTSEurofirst 300 index ended little changed but was up 3.1% for the week, its biggest advance since March.
- The commodity-heavy UK FTSE 100 index fell by 0.4%, pulled down by a 3.4% fall in oil and gas stocks. But the index snapped a two-week losing streak with a gain of 1.7%.
Currencies
Were stronger against the US dollar in European and US trade.
- The Euro rose from US$1.0619 to US$1.0744 and was near US$1.0730 at the US close.
- 'The Aussie dollar lifted from US64.28 cents to US65.17 cents and was near US65.00 cents at the US close.
- The Japanese yen firmed from 150.41 yen per US dollar to JPY149.24 and was near JPY149.40 at the US close.
Commodities
Global oil prices fell more than 2% on Friday as supply concerns driven by Middle East tensions eased, while US jobs data raised expectations the US central bank could be done hiking interest rates.
- The Brent crude price fell by US$1.96 or 2.3% to US$84.89 a barrel.
- The US Nymex crude price dipped by US$1.95 or 2.4% to $80.51 a barrel. Both benchmarks settled down about 6% on the week.
Base metal prices rose on Friday as the US dollar weakened.
- Copper futures rose 0.2% and aluminium futures gained 1.1%. For the week, copper and aluminium both lifted 1%.
- On Friday, the gold futures price rose by US$5.70 or 0.3% to US$1,999.20 an ounce. Spot gold was trading near US$1,992 an ounce at the US close. Bullion was broadly flat for the week.
- Iron ore futures gained US58 cents or 0.5% to US$126.15 a tonne on Friday. Iron ore rose for a second consecutive week, up 6.4%, underpinned by stimulus-related optimism and supportive fundamentals in top consumer China.
On the small cap front
The S&P/ASX Small Ordinaries was 1.28% higher to 2,658.30.
It has been steady on the news front this morning. You can read about the following and more throughout the day.