Australian shares are likely to rise when the market opens on Wednesday in the wake of a stronger night on Wall Street, where the Dow Jones Industrial Average closed at a new peak after a rotation from expensive technology stocks to those offering better value.
A rise of almost 0.2% in the S&P/ASX 200 index is in prospect, with the December share price index contract last trading 15 points above its previous settlement at 8,861 points.
It was a mixed session in the United States on Tuesday (Wednesday AEDT) with the Dow hitting a record high as investors shifted from major tech stocks into blue-chip names.
The market was also buoyed by more progress toward ending the government shutdown, but artificial intelligence (AI)-related companies fell on renewed concerns about elevated valuations, dragging down the Nasdaq Composite index.
The Dow climbed 1.2% and the S&P 500 put on 0.2% as U.S. House of Representatives members returned to Washington after a 53-day break for a vote that could end the shutdown.
But the tech-laden Nasdaq fell 0.3% amid the move out of AI-linked shares like Nvidia.
"Expectations are that the shutdown is over. ... People will get back to work, economic data will be released once again and uncertainty will be behind us," CFRA Chief Investment Strategist Sam Stovall was quoted in a Reuters story as saying.
Chief CommSec Economist Ryan Felsman said the ASX would be supported by a lift in energy producers after a rise in the oil price overnight.
He said United States investors had rotated out of technology stocks overnight into the cheaper parts of the market, including value and cyclical stocks, which pushed the Dow to a record close.
Healthcare stocks in particular performed well in the U.S. and in Australia could benefit from an attraction to defensive companies, but it was difficult to determine the significance for the ASX, given sector giant CSL (ASX: CSL) has been underperforming.
A fall in the Commonwealth Bank of Australia (ASX: CBA) price on Tuesday following the release of its results dragged down the broader financial sector on Tuesday, although the overall market finished up.
“It'll be interesting to see whether there's a bit of a bounce back in financials today,” Felsman said.
The Australian market had finished 0.19% down on Tuesday as CBA weighed on the financials sector and despite higher gold and lithium miner prices.
In news today, Flight Centre (ASX: FLT) and Domino's Pizza Enterprises (ASX: DMP) hold annual general meetings, while Aristocrat Leisure (ASX: ALL) has released its full-year results.
“Typically there’s some nuggets from those meetings and about the consumer, for example with demand for pizza delivery and discretionary spending and therefore at the same time travel,” Felsman said.
In fixed interest markets, yields in Australian Government bonds reversed their recent ascent, dropping 0.03% to 3.624% at the two year end of the curve and 0.41% to $4.364% over 10 years.
