The continuing Middle East truce and expectations of lower United States interest rates are set to provide Australian shares with the same boost they gave Wall Street overnight.
At the time of writing the S&P/ASX 200 share price index September contract was quoted 51 points higher than the previous settlement at 8,584 points, indicating an 0.6% average price hike at the 10 am AEST (12 pm GMT Thursday) opening.
Equities in New York finished higher on Thursday (Friday AEST) with the S&P 500 and the Nasdaq edging toward record closes as the Israel-Iran ceasefire remained in place and data supported the U.S. Federal Reserve (Fed) cutting interest rates later this year.
The Dow Jones Industrial Average rose 0.9%, the S&P gained 0.8% and the Nasdaq Composite gained 1.0%, with the latter two nearing record highs.
Projections last week showed policymakers expected the Fed to cut rates by 0.5% this year as data indicates economic weakness in the U.S., with some exceptions.
Higher U.S. stocks painted an optimistic backdrop on the second last trading day of the 2025 financial year for the Australian market which eased on Thursday due to losses in the technology and real estate sectors with the S&P/ASX 200 losing 0.1% to 8,550.8.
In fact real estate investment trusts (REITs) could remain soft on Friday as some trade ex-dividend.
The ASX index has risen 4.8% this year and recovered strongly from April's lows. However, Morningstar said Australian equities were moderately unattractive and trading at elevated valuations, which may weigh on returns as multiples normalise in the long-term.
“This view is reinforced by the moderately unattractive view of expected cash flows from our equity analysts. In aggregate, we maintain a cautious perspective on the Australian market,” the research organisation wrote in a research report.
On Australian fixed interest markets, Australian Government bonds continued their six-week rally with yields falling 0.05% to 4.127% for 10-year paper and 0.50% to 3.185% at the two-year end of the curve.
