The Australian sharemarket is expected to open lower at the start of a week expected to bring another increase in official interest rates, but the focus of investors remains on the United States’ war with Iran and its impact on oil prices.
An 0.7% drop in the ASX 200 index is likely, based on futures trading on the Australian Securities Exchange (ASX), which priced the March contract 61 points under the prior settlement at 8,547 points at the time of writing.
The United States market set the scene for ASX trading, which resumes at 10:00 am AEDT (11:00 pm GMT Sunday), with the main stock benchmarks closing weaker on Friday at new lows for the year due to rising oil prices and escalating Middle East tensions.
The Dow Jones Industrial Average fell 0.3%, the S&P 500 lost 0.6%, and the Nasdaq Composite shed 0.9%.
Crude oil prices increased despite U.S. President Donald Trump temporarily easing sanctions on Russian oil exports, with West Texas Intermediate futures rising 3.11% to US$98.71 per barrel and Brent crude futures adding 2.67% to close at $103.14.
Murphy & Sylvest Senior Wealth Advisor & Market Strategist Paul Nolte said the market was not being driven by fundamental factors, with volatility in the energy market rivalling any two-week period in cryptocurrency history.
"It's very much an emotional market, so it really doesn't make sense trying to trade, let alone invest in this market," Nolte was quoted in a Reuters story as saying.
The Australian market had ended broadly flat on Friday, with the ASX 200 ending down 0.1% at 8,617.1 points as higher banking and energy company prices counteracted lower materials sector stocks.
The major economic news in Australia this week is the Reserve Bank of Australia’s next decision on interest rates tomorrow, with most economists expecting a lift in the cash rate by 25 basis points to 4.10%.
In fixed interest markets, yields on Australian Government bonds eased with two year rates down 0.37% to 4.558% and 10 year rates off by 0.30% to 4.981%.
