Shares lift following US pull-back
Local stocks fell from five-year highs on Friday as investors prepared for the US Federal Reserve to start winding back its stimulus program at an Open Market Committee on Wednesday.
But weak US retail sales figures released late on Friday have made it harder for the Reserve to justify cuts. According to Bloomberg economists, the Reserve will begin tapering its $85 billion monthly bond purchases this week, but only by about $10 billion.
"It is becoming increasingly difficult for the Federal Reserve to justify reducing stimulus next week," Kathy Lien, managing director of FX strategy for BK Asset Management said.
"A slowdown in consumer spending, decline in confidence and sluggish job growth screams of a recovery that is losing momentum. Inflationary pressures are virtually non-existent ... "
Retail sales growth in the US slowed to 0.2 per cent from 0.4 per cent in the month of August, a report showed.
Local investors will also be looking to Tuesday's release of the Reserve Bank's monthly board meeting minutes for any indication on interest rate movement.
On Friday, ANZ economists released an improved outlook for iron ore over the next two years.
The upward price revisions are short term and reflect stronger than expected demand for steel in China so far this year.
"Our recent marketing trip to China confirmed a more buoyant steel story," Mark Pervan, global head of commodity strategy, said in a note.
Frequently Asked Questions about this Article…
Economists expect a positive start because forecasts suggest a delay to serious stimulus spending cuts in the world’s biggest economy (the US). That easing of immediate tightening pressure can support local share prices after recent volatility.
Weak US retail sales—slowing to 0.2% from 0.4% in August—made it harder for the Federal Reserve to justify reducing stimulus immediately. The softer consumer spending data prompted market participants to expect a more cautious or smaller initial taper.
Bloomberg economists expect the Fed to begin tapering its $85 billion monthly bond-purchase program, but only modestly—by about $10 billion—rather than a large, immediate cut.
Local stocks eased from five‑year highs as investors positioned for the US Federal Reserve to start winding back its stimulus program at the Open Market Committee meeting, creating short‑term uncertainty for markets.
Australian investors should watch the Reserve Bank of Australia’s monthly board meeting minutes, due Tuesday, for any indications or commentary on possible interest rate movement from the RBA.
ANZ economists issued an improved outlook for iron ore over the next two years. The short‑term upward price revisions reflect stronger‑than‑expected demand for steel in China, which can support iron ore prices and benefit commodity‑exposed companies.
Stronger steel demand in China lifts demand for iron ore, prompting upward short‑term price revisions. For everyday investors, that can translate into improved performance for mining stocks and other commodities sensitive to Chinese steel activity.
Keep an eye on key indicators cited in the report: US retail sales and other US demand data, the Fed’s Open Market Committee announcements, and the RBA’s board minutes. Also monitor commodity signals such as China’s steel demand and iron ore price guidance, and align any portfolio moves with your risk tolerance rather than short‑term headlines.
Call 1300 880 160
Start a chat
Schedule a call
