The Australian sharemarket is set to extend gains by opening a little firmer on Friday despite weakness in equities in the United States overnight.
The Australian Securities Exchange (ASX) benchmark should start almost 0.1% higher at 10 am AEST (12 am GMT Thursday) with future trading putting the S&P/ASX 200 share price index December contract eight points over the prior settlement at 8,810.
U.S. share markets ended lower on Thursday (Friday AEST) for a third straight day as economic data raised doubts about the outlook for interest rate cuts by the Federal Reserve (Fed).
The Dow Jones Industrial Average lost 0.4%, the S&P 500 dropped 0.5% and the Nasdaq Composite ended 0.5% lower after data showed the U.S. economy grew at the fastest pace in nearly two years and Chicago Fed President Austan Goolsbee said he was uneasy about cutting rates too quickly due to the risk of inflation.
"The economic data that's come out over the last day or two is kind of confusing in that, in my mind, it calls into question" how much the Fed may cut rates again and whether the Fed needs to cut rates again this year, Chase Investment Counsel President Peter Tuz was quoted in a Reuters story as saying.
The Australian market had ended almost unchanged on Thursday, with the S&P/ASX 200 closing just 8.50 points down at 8,773.0.
Burrell Stockbroking wealth adviser Adam Dight said he expected the market to be steady as the “smart money does nothing or just keeps rotating out of rubbish – the stocks that didn't really get through reporting in one piece”.
He said companies that had not demonstrated they had emerged from the effects of the COVID pandemic with strong business models or increased market share remained in the “dog house” with prices at or new lows.
A bright light was the small end of the market, which had performed strongly as the undervaluation to larger stocks was recognised, particularly given that earnings growth was not forecast to be strong and could weaken further.
“It’s now a case of the rise of the small caps, the whole undervaluation relative to the big guys,” Dight said.
In fixed interest markets, the Australian Government bond yield curve flattened as two-year rates rose 0.06% to 3.538% and 10-year rates lost 0.18% to 4.389%.
