Market to take a breather after seven-day streak

AUSTRALIAN stocks are tipped to make a subdued start to the trading week as investors catch their breath after a recent rally.

By InvestSMART · 8 Oct 2012

By InvestSMART ·
8 Oct 2012

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AUSTRALIAN stocks are tipped to make a subdued start to the trading week as investors catch their breath after a recent rally.

The CommSec chief economist, Craig James, says he expects quiet conditions when the local market opens today.

"We had a really good gain on Friday and I think investors are just going to bed down those gains," Mr James said. "Monday will probably be more of a day of consolidation than anything else."

The Australian sharemarket closed Friday's local session up 0.9 per cent, finishing higher for a seventh straight session.

Jobs numbers are expected to be a focus for the week, with the Australian Bureau of Statistics scheduled to publish its September labour force report on Thursday. Economists expect the economy to have added 5000 jobs during the month and unemployment to have risen to 5.3 per cent from 5.1 per cent in August.

A private-sector job advertisements survey and reports on consumer confidence and business conditions also are due this week.

The Reserve Bank of Australia deputy governor, Philip Lowe, is scheduled to speak at a Financial Services Institute of Australasia lunch in Hobart tomorrow.

On the ASX 24, the December share price index futures contract ended weekend offshore trading a point higher at 4493 on 4560 contracts traded. The dollar finished overseas trading at US101.7?, against Friday's local close of US102.51?.

In companies news, the first meeting of creditors of Gunns Ltd, which went into administration and receivership on September 25, will be in Launceston on Wednesday.

Toll road company Transurban Group is scheduled to publish its first quarter traffic report.

US stocks received a boost from a US employment report that showed the world's largest economy added 114,000 jobs in September. Moreover, the US unemployment rate fell to 7.8 per cent, from 8.1 per cent in August, and there were also upward revisions to the previous month's figures.

Wall Street rallied on the report before slipping in late trade before a US public holiday today and the start of the US corporate earnings season this week.

The Dow Jones Industrial Average finished up 0.26 per cent and at levels not seen since December 2007, while the S&P500 edged down a slender 0.03 per cent and the NASDAQ slipped 0.42 per cent.

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Frequently Asked Questions about this Article…

Why are Australian stocks expected to take a breather after a seven-day rally?

Markets are likely to be subdued because investors are consolidating gains after a strong run. The Australian sharemarket finished higher for a seventh straight session, closing up 0.9% on Friday, and CommSec chief economist Craig James expects Monday to be 'more of a day of consolidation' as traders 'bed down those gains.'

What jobs data should everyday investors watch this week and why does it matter?

The key data is the Australian Bureau of Statistics' September labour force report due Thursday — economists in the article expect the economy to have added about 5,000 jobs and unemployment to have risen to 5.3% from 5.1%. Investors will also be watching a private‑sector job advertisements survey because labour market trends can influence interest rate expectations and sharemarket sentiment.

Which company events are highlighted this week that could affect investors?

Two company items to watch: the first meeting of creditors for Gunns Ltd (which went into administration and receivership on September 25) will be held in Launceston on Wednesday, and toll‑road operator Transurban Group is scheduled to publish its first quarter traffic report — both could be relevant to shareholders and creditors.

How did the US jobs report and Wall Street moves affect market mood?

A US employment report showed the US added 114,000 jobs in September and the unemployment rate fell to 7.8% from 8.1%, with upward revisions to prior months. That boosted US stocks earlier in the session, though Wall Street slipped late before a US public holiday and the start of the US corporate earnings season.

What did ASX 24 futures indicate about market direction offshore?

On the ASX 24, the December share price index futures contract ended offshore trading a point higher at 4,493 on 4,560 contracts traded, suggesting only modest movement in futures market activity heading into the local open.

What happened to the Australian dollar in overseas trading?

The article reports the Australian dollar finished overseas trading at about US101.7, compared with Friday's local close around US102.51, indicating a slight move in the currency market ahead of the local session.

What other economic reports should investors keep an eye on this week?

Aside from the ABS labour force data, investors should watch reports on consumer confidence and business conditions and the private‑sector job advertisements survey, all of which are due this week and can give additional clues about economic momentum.

Why might investors pay attention to RBA deputy governor Philip Lowe's speech this week?

Philip Lowe is scheduled to speak at a Financial Services Institute of Australasia lunch in Hobart. Speeches by senior RBA officials are closely watched because they can offer insight into monetary policy thinking and the economic outlook, which can influence investor expectations.