Overseas lead will provoke a bull trot
US stocks rallied on Friday, with the Dow closing above 14,000 points for the first time since October 2007 after a positive US jobs report.
In comparison, Australia's S&P/ASX 200 Index is only trading at about 20-month highs.
The Dow Jones Industrial Average closed at 14009.79 points, up 149.21 (or 1.08 per cent). The broad-based S&P 500 finished at 1513.17 points, up 15.06 (1.01 per cent), while the tech-heavy Nasdaq jumped 36.97 points (1.18 per cent) to 3179.10.
The Dow broke through 14,000 points after a US jobs report showed net jobs grew at an average 181,000 a month in 2012, well above forecasts of 153,000. German and British stocks also posted strong gains on Friday, rising about 1 per cent.
On Sunday, the ASX 24 March share price index futures contract was pointing to a 24-point gain on Monday, to 4903 points.
CommSec chief economist Craig James said while he also expected gains to start the week in Australia, he believed they would be more modest than futures trading was indicating.
The strong offshore gains on Friday were related to profit-taking that had occurred the previous day to mark the end of January, which had already happened in Australia, he said.
"I think it will be higher, certainly all the positive factors are there, but perhaps the expectation in terms of the futures market may be a little bit on the firm side," he said. "We have reporting season starting up, the interest rate decision and investors have got to have a degree of caution going into the week."
The optimism that has seen a bull run in shares in recent weeks will be tested by the start of the Australian earnings season.
On Tuesday, Challenger Diversified Fund is expected to report, with Cochlear, Transurban, Reckon and Navitas also listed.
On the economic front, the monthly inflation gauge, building approvals and job advertisements will be released. CommSec expects a modest lift in building.
The RBA is not expected to move rates on Tuesday, amid signs the global economy is improving.
Last Friday, the Australian market returned to its two-week bull run as investors, buoyed by a positive US earnings season, turned to high-yielding stocks. The market is up nearly 6 per cent for the year.
On Friday, the S&P/ASX 200 closed up 42.3 points, or 0.87 per cent, at 4921.1, and the broader All Ordinaries closed up 40.9 points, or 0.83 per cent, at 4941.9.
Frequently Asked Questions about this Article…
Yes — the article says the Australian sharemarket was expected to open higher after positive offshore leads and futures trading. ASX24 March futures were pointing to about a 24-point gain to 4,903, though CommSec’s Craig James warned actual gains in Australia might be more modest than futures suggest because of upcoming reporting season and the interest rate decision.
The US rally was driven largely by a stronger-than-expected US jobs report showing net jobs growing at an average 181,000 a month in 2012 versus forecasts of 153,000. The Dow closed at 14,009.79, helped by broader gains in the S&P 500 and Nasdaq, and German and British markets also rose about 1%.
The S&P/ASX 200 was trading near 20-month highs and closed up 42.3 points (0.87%) at 4,921.1 on Friday. The article also notes the Australian market is up nearly 6% for the year, while the US benchmarks showed strong single-day gains after the jobs and earnings news.
The article lists several names for the start of reporting season: Challenger Diversified Fund was expected to report on Tuesday, and Cochlear, Transurban, Reckon and Navitas were also listed as upcoming reporters.
Investors should watch the monthly inflation gauge, building approvals and job advertisements releases. CommSec expected a modest lift in building approvals, and these data points will provide context ahead of the RBA’s interest rate decision.
No — according to the article the RBA was not expected to move rates on Tuesday, amid signs the global economy was improving.
The article says Australian investors, buoyed by a positive US earnings season, rotated into high‑yielding stocks and helped the market return to a two‑week bull run, contributing to the S&P/ASX 200’s gains.
Yes — CommSec chief economist Craig James suggested investors should exercise a degree of caution. While positive factors point to higher markets, he noted futures might be a bit optimistic and warned that reporting season and the upcoming interest rate decision could test recent optimism.
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