Overseas trading points to a hot 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…
Overseas markets and futures trading were positive, with strong gains in US, German and British stocks after a better-than-expected US jobs report. ASX futures were pointing to a modest gain, so Australian markets were expected to start the week higher.
A US jobs report showing average monthly job growth of about 181,000 in 2012 beat forecasts of 153,000, helping US stocks rally. The Dow Jones closed above 14,000 for the first time since October 2007, which lifted global risk sentiment and influenced Australian futures.
The ASX 24 March futures contract was pointing to a 24-point gain to 4903 points, signalling a positive start. CommSec cautioned that actual gains on the open might be more modest than futures suggest, so investors should temper expectations and watch early trading.
Yes. CommSec chief economist Craig James noted that while positive factors are in place, futures might be a bit firm and investors should be cautious heading into the week because reporting season and an upcoming interest rate decision can increase volatility.
The article notes that reporting season kicks off with Challenger Diversified Fund expected to report on Tuesday, and other listed companies reporting around that time include Cochlear, Transurban, Reckon and Navitas.
The weekly calendar includes the monthly inflation gauge, building approvals and job advertisements. CommSec expected a modest lift in building approvals. These releases can influence investor views on inflation and growth ahead of the RBA decision.
No. The RBA was not expected to move rates on Tuesday, given signs that the global economy is improving, according to the article.
The market had returned to a two-week bull run and was up nearly 6% for the year. Investors, encouraged by a positive US earnings season, shifted toward high-yielding stocks, helping the S&P/ASX 200 and the All Ordinaries close higher.
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