The Australian share market is poised to open flat to slightly higher today despite generally weak performances to end last week in the U.S. and Europe.
Wall Street
Both the Dow and the S&P 500 closed Friday marginally lower; the Dow was down 4.8 points (-0.01 per cent) to close at 36,231.66 while the S&P 500 shed 19 points (-0.41 per cent) to 4,677.03 to the end the week. The Nasdaq retreated almost 145 points (-0.96 per cent) to 14,935.9 points.
For the tech-heavy Nasdaq, it was its worst week since February 2021, down about 4.5 per cent in the first five trading days of 2022. The S&P 500 was off by 1.8 per cent, while the Dow lost only 0.29 per cent as investors rotated into some value stocks amid the rise in rates.
On Friday, the Labor Department reported the U.S. economy added far fewer jobs in December than expected. The non-farm payrolls report showed an increase of 199,000 in December, though economists had expected growth of 422,000, according to Dow Jones.
While the headline number disappointed, there were some things in the jobs report that pointed to an improving economic picture and higher inflation. Average hourly earnings increased by 0.6 per cent, above expectations. And the unemployment rate fell to 3.9 per cent, the lowest level since February 2020 and well below the 4.1 per cent expected.
Analysts believe the bond market could again set the course for the week ahead, after rapidly rising interest rates gave stocks a choppy start to the new year. In the coming week, key inflation reports are expected, and Federal Reserve Chairman Jerome Powell is slated to testify Tuesday at his nomination hearing before a Senate panel.
The week also marks the start of the fourth-quarter earnings period.
Yields rose rapidly across the curve, but the dramatic move of the benchmark 10-year, which influences mortgages and other loans, was particularly rattling for investors. The 10-year rose from 1.51 per cent in the final hour of 2021 trading to as high as 1.80 per cent on Friday. According to Wells Fargo, that makes it the second-biggest move in the yield for the first week of the year in 20 years.
According to CME Group, investors are now pricing a better than 79 per cent probability that the Fed will raise short-term rates in March. A month ago, they saw less than 39 per cent of a chance of that happening.
In London, the FTSE 100 ended the week on a positive note, gaining 34.91 points (0.47 per cent) to 7,485.28 at Friday’s close. However, across the English Channel, European stocks closed lower on Friday as investors digested Euro-zone inflation data and the weaker-than-expected U.S. jobs report.
Australian outlook
The SPI futures index is up two points (0.03 per cent) to 7,351 with the market expected to shake off the U.S. wobbles, supported by Australia’s well-performing mining and financial services sectors.
Health and aged care technology player Caretech begins trading at 11am AEDT today having raised $6-million in its initial public offering.
The only significant statistics due out of Canberra today are national building approvals for November, with retail sales for the same month due to be released tomorrow.
Commodities
The gold price is nudging US$1800 an ounce having gained 0.38 per cent on Friday to close at US$1,796.95 an ounce.
Both platinum and silver were trading flat at US$962.00 and US$22.47 respectively.
Iron ore was trading slightly higher at US$126.21 a tonne while Brent crude was marginally lower at US$81.93 a barrel.
Currency
The Australian dollar was trading slightly higher overnight at US$0.7182, €0.6320, £0.5284 and NZ$1.059.
Happy Monday.