Investors cautious ahead of cliff threat
Futures trading was pointing to a weak start on the local market on Monday, after Wall Street closed lower as investors fretted over the likelihood of US President Barack Obama and legislators in Congress reaching a deal over the so-called fiscal cliff.
CommSec chief economist Craig James said despite some encouraging data on US manufacturing, inflation and industrial production, and BHP Billiton and Rio Tinto being well-supported in London trade, the fiscal cliff was dominating sentiment.
‘‘If we could solve the fiscal cliff problem, then everything would be all right,’’ Mr James said on Sunday. ‘‘That’s the only issue out there at the moment.’’
A series of US tax hikes and government spending cuts, referred to as the fiscal cliff, are due to hit at the start of calendar 2013.
Unless an agreement is reached, these measures could push the US economy back into recession, which would have a significant knock-on impact on the global economy. On the ASX24, the December share price index futures contract ended Friday night’s (AEDT) session down 10 points at 4571, on volume of 7108 contracts.
In New York, the Dow Jones Industrial Average slumped 0.27 per cent, the S&P500 eased 0.41 per cent and the NASDAQ Composite tumbled 0.7 per cent.
‘‘Progress in resolving the US fiscal cliff remains slow,’’ AMP Capital Markets chief economist Shane Oliver said in a research note dated December 14. ‘‘An agreement before year end would be a good outcome for equity markets.’’
In economics news, the minutes of the Reserve Bank of Australia’s (RBA) December board meeting are due out on Tuesday, while the Westpac-Melbourne Institute leading index of economic activity report will be released on Wednesday.
The RBA cut the cash rate by 25 basis points to three per cent at its December meeting.
In companies news, ANZ, DuluxGroup and Incitec Pivot are among companies holding annual general meetings this week.
The Australian dollar finished weekend trading at 105.72 US cents, up from 105.44 US cents at Friday’s local close.
Frequently Asked Questions about this Article…
The article explains the fiscal cliff as a package of US tax increases and government spending cuts scheduled to hit at the start of calendar 2013. Investors are worried because, unless an agreement is reached, those measures could push the US economy back into recession and have a significant knock‑on impact on global markets — sentiment that was dominating trading.
Futures were pointing to a weak local open after Wall Street closed lower amid investor concern about the US fiscal cliff. The ASX24 December futures contract ended the Friday night (AEDT) session down 10 points at 4,571 on volume of 7,108 contracts, reflecting that cautious tone.
New York markets slipped — the Dow fell 0.27%, the S&P 500 eased 0.41% and the NASDAQ dropped 0.7% — and that weakness fed through to Australian sentiment, contributing to the weaker futures and a cautious start to the local week.
CommSec chief economist Craig James noted that BHP Billiton and Rio Tinto were well supported in London trade, which helped some market participants, but overall the fiscal cliff remained the dominant influence on sentiment.
The article says investors should watch the Reserve Bank of Australia (RBA) minutes from its December board meeting, due out on Tuesday, and the Westpac‑Melbourne Institute leading index of economic activity report, due on Wednesday. The RBA had cut the cash rate by 25 basis points to 3% at its December meeting.
The article lists ANZ, DuluxGroup and Incitec Pivot as among the companies holding annual general meetings that week. AGMs are relevant because they give shareholders and everyday investors a chance to hear company updates and ask questions about performance and strategy.
The article reported the Australian dollar finished weekend trading at 105.72 US cents, up from 105.44 US cents at Friday’s local close.
Based on the article, everyday investors should watch progress on US fiscal cliff negotiations, RBA minutes and local economic indicators, major futures moves (ASX24), corporate AGM announcements (for example ANZ, DuluxGroup, Incitec Pivot) and currency movements such as the Australian dollar — all of which were highlighted as factors influencing market sentiment.
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