Market Open: ASX set for weaker open as rate pressure keeps investors cautious

ASX today – The Australian sharemarket is set for a softer start to the week, with ASX 200 futures pointing to a fall of around 0.7% after a volatile week for global markets.

The S&P/ASX 200 closed down just 1.20 points Friday to 8,731.20, leaving the index virtually unchanged over the previous five days and year to date.

The picture from Wall Street was less dramatic. The S&P 500 rose 0.17%, the Nasdaq gained 0.40% and the Dow slipped 0.18% on Friday, as investors continued to digest the Federal Reserve’s first rate hike in three years and the implications of higher borrowing costs. The US 10-year yield remained around 5.0%, keeping the focus firmly on inflation and the outlook for interest rates.

For Australian investors, however, the rate story is not just coming from the US.

The RBA’s September meeting is now less than two weeks away, with governor Michele Bullock’s recent comments keeping the possibility of another rate increase firmly in focus. The market is watching how higher rates affect banks, property and other rate-sensitive parts of the ASX, while the Australian dollar remains around US$71 cents.

That leaves an interesting split for the local market: higher rates and weaker global equity sentiment are likely to weigh on the broader index, while firmer metals and gold prices could continue to support parts of the resources sector.

Crude oil prices ended the week lower as initial concerns over extended disruptions to pipeline flows from Saudi Arabia eased.

Beyond today’s session, the week has several potential market-moving events. China’s one-year and five-year loan prime rates were left unchanged at 3.0% and 3.5% respectively, while investors will also be watching developments around this week’s meeting between US President Donald Trump and Chinese President Xi Jinping, particularly trade, critical minerals and technology.

For the ASX today, the key question is whether the market can absorb the expected weaker open without another broad-based sell-off — and whether resources can provide enough support to offset pressure on the market’s heavyweight financial and growth stocks.

Local market news

Lycopodium (ASX: LYL) has been awarded an EPCM contract for Greatland’s Havieron gold-copper project;

Perpetual Resources (ASX: PEC) has reported that rig mobilisation is underway at the Igrejinha lithium project;

Right Resources (ASX: RRE) has commenced maiden drilling at the Blue prospect;

Eclipse Metals (ASX: EPM) is spinning the bit to advance its Greenland 208 Mt Gronnedal resource; and

Broken Hill Gold (ASX: BH6) has unveiled a 160% increase in the Vertigo MRE at White Dam project.

Buck and ore

Now – in forex, the Oz dollar is buying US$0.711

Looking at commodities, all in the greenback,

Iron Ore was up 0.15% to $97.57 per tonne in Singapore today,

Brent Crude was down 0.91% to $103.870per barrel,

Gold was selling at $4383.45,

US natgas futures were up 0.38% to $2.9120 per gigajoule.

That’s HotCopper’s Market Open, I’m Colin Sandell-Hay – happy trading.

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