Given mixed signals from the United States and with a key interest rate milestone behind it, the Australian sharemarket is expected to side with the majority and open lower on Thursday.
Futures market trading indicates the market will start down by about 0.5% when trading begins at 10 am AEST (12 am GMT Wednesday) as the S&P/ASX 200 share price index December contract was quoted 15 points below the prior settlement at 8,839.
This market is taking a lead from Wall Street, where two of the three major benchmarks ended lower after the Federal Reserve did what it was expected to do and cut its benchmark lending rate by 25 basis points to the 4-4.25% target range.
The Dow Jones Industrial Average ended up 0.6% but the S&P 500 lost 0.1% and the Nasdaq Composite dropped 0.3% to 22,261.3.
The U.S. central bank’s Federal Open Market Committee (FOMC) also indicated it would steadily lower rates for the rest of the year due to concerns about weakness in the labour market.
Goldman Sachs Asset Management Head of Fixed Income Macro Strategies Simon Dangoor said most FOMC members were planning for two more rate cuts this year.
“We think it would take a significant upside surprise in inflation or labour market rebound to take the Fed off its current easing trajectory,” Dangoor was quoted in a Wall Street Journal article as saying.
A lower opening would extend losses on the S&P/ASX 200 Index, which had fallen 0.7% to 8,818.5 on Wednesday.
The main economic news today in Australia is August employment data, while companies in focus include Santos (ASX: STO) following the withdrawal of a takeover bid and a2 Milk (ASX: A2M), Cochlear (ASX: COH) and South32 (ASX: S32), which trade ex-dividend.
In fixed interest markets, yields on Australian Government bonds continued to rise, with two year rates putting on 0.30% to 3.391% and 10-year rates adding 0.76% to 4.257%.
