Muted opening to our week

Published in the Daily Telegraph, August 2010

The local market is expected to open the week a little stronger this morning but the trading will be muted after a flat lead from Wall Street on Friday.

Futures trading is pointing to a small rise of seven points on the Australian bourse.

CommSec chief economist Craig James said today's market activity was likely to be uninspiring.

"We have a holiday in NSW and the ACT, a bank holiday, and the close in Wall Street on Friday was very flat," Mr James said.

"Base metals prices, oil and gold, were all higher, so there is a positive lead-in for the mining sector."

On Friday, Australia's sharemarket suffered broad-based falls, with the benchmark S&P index down 30.6 points, or 0.68 per cent, to finish the week at 4493.5, while the broader All Ords was down 28.8 points to finish at 4507.4 points.

Later in New York the Dow Jones Industrial Average dipped 1.22 points (0.01 per cent) to finish the week at 10,465.94 while the broader S&P 500 index gained 0.07 points (0.01 per cent) to finish at 1101.60 points.

The tech-heavy NASDAQ composite index rose 3.01 points (0.13 per cent) to finish at 2254.70 points.

Wealth Within chief economist Dale Gillham said market volumes in July tend to be lower than any other month, except for January when the country is on holidays.

"However, the difference between this month and activity in July last year is that lower volume last year was accompanied by a strong price rise." he said.

"Currently we are seeing inconsistent movements in the market with only a handful of days that are rising strongly.

"Given this, it would not surprise me to see our market fall away over the next one to four weeks."

Today the Housing Industry Association (HIA) new home sales data for June will be released, as well as the RBA's index of commodity prices for July.

The Reserve Bank of Australia (RBA) will meet tomorrow to decide on any interest rate rise, but is widely expected to keep them on hold following recent encouraging inflation figures.

However, National Australia Bank chief economist Alan Oster is tipping interest rates will rise about 1 per cent over the next 12 months. 

He said that once consumers began to worry less about Europe's debt problems, the RBA would again start rate rises.

"We have a half a per cent towards the end of the year and another half maybe by about the middle of next year, so maybe about 100 points in total from here is still, I think, where we need to go," Mr Oster said.

On Wednesday, international trade data will be released and it's believed, courtesy of coal and iron ore, surpluses will have returned.

"We do have a fair bit of data to digest over the week," Mr James said. 

"I suppose most interest will be right at the tail end of the week with the statement of monetary policy from the Reserve Bank." he said

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