Strength in technology stocks in the United States overnight has given investors the confidence to slightly mark up share prices in Australia on Wednesday as the market waits for crucial inflation data.
The S&P/ASX 200 index is expected to start about 0.1% higher than the previous close and, in doing so, regain some of the losses suffered on Tuesday when it opens at 10:00 am AEDT (11:00 pm Tuesday GMT).
The December share price index contract was quoted 11 points over the prior settlement at 9,041 points, at the time of writing.
The three main stock indices in New York achieved record closing levels on Tuesday (Wednesday AEDT) due to strength in companies leveraged to the artificial intelligence (AI) capital investment (capex) boom, hopes of a United States-China trade breakthrough and expectations of an interest rate cut.
The Dow Jones Industrial Average added 0.3%, the S&P 500 rose 0.2% and the Nasdaq Composite climbed 0.8% in a week in which some of the so-called ‘Magnificent Seven’ tech companies are due to hand down their latest quarterly results.
"With five of the Mag Seven reporting this week, what the market expects to hear is confirmation that all this AI capex is coming through, that the revenues and profits from AI are coming through," Wells Fargo Investment Institute Senior Global Market Strategist Scott Wren was quoted in a Reuters story as saying.
Chief CommSec Economist Ryan Felsman said the Australian market was likely to be supported by the U.S. tech gains and higher aluminium prices, despite falls in gold, oil and iron ore prices.
“We expect to see support for the market but gains will probably be held back by the fact we have a very small tech sector,” he said.
The Australian market finished down on Tuesday with the S&P/ASX 200 losing 0.5%, to 9,012.5.
A focus today will be the September consumer price index (CPI) data, which is closely watched by the Reserve Bank of Australia in setting official interest rates and will be crucial in determining if monetary policy is eased again in November.
Stocks to watch include Woolworths (ASX: WOW), which has released its first quarter sales numbers.
The yield curve steepened slightly for Australian Government bonds as two-year rates dropped 0.12% to 3.433% and 10-year rates edged up 0.10% to 4.173%, at the time of writing.
