Shares tipped for tentative start as US deadline nears
Futures trading was pointing to a weak start on the Australian market on Monday, after Wall Street closed lower as investors fretted over the likelihood of the US President, Barack Obama, and legislators in Congress reaching a deal over the fiscal cliff.
The chief economist at CommSec, Craig James, said despite some encouraging US manufacturing, inflation and industrial production data - 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.
A series of US tax rises and government spending cuts, referred to as the fiscal cliff, are due to hit at the start of next year.
Unless an agreement is reached, these measures are expected to push the US economy into recession, which would have a significant knock-on effect on the global economy.
On the ASX 24, the December share price index futures contract ended Friday night's session down 10 points at 4571, on volume of 7108 contracts.
In New York, the Dow Jones Industrial Average fell 0.27 per cent, the S&P 500 fell 0.41 per cent and the Nasdaq Composite fell 0.7 per cent.
"Progress in resolving the US fiscal cliff remains slow," said Shane Oliver, the chief economist at AMP Capital Markets, in a research note dated December 14. "An agreement before year end would be a good outcome for equity markets."
The minutes of the Reserve Bank of Australia's 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 3 per cent at its December meeting.
ANZ, DuluxGroup and Incitec Pivot are among companies holding annual meetings this week.
The Australian Competition and Consumer Commission is expected to issue determinations on Qantas Airways' proposed alliance with Emirates and carsales.com.au's deal with the Telstra-owned Trading Post.
The Australian dollar finished weekend trading at US105.72¢, up from US105.44¢ at Friday's close.
Australian stocks have risen about 2 per cent so far in December.
Frequently Asked Questions about this Article…
Australian shares were tipped to start the last full trading week before Christmas cautiously, with futures pointing to a weak open. Wall Street closed lower amid investor concern about whether US political leaders would reach a deal to avoid the fiscal cliff, which was dominating market sentiment.
The fiscal cliff refers to a set of US tax increases and government spending cuts due to kick in at the start of the next year. The article notes that if no agreement is reached, these measures could push the US economy into recession and have a significant knock-on effect on the global economy, which would likely affect Australian markets and investor portfolios.
The article specifically mentions BHP Billiton and Rio Tinto as being well supported in London trade, suggesting some resilience in the resources sector even as broader market sentiment was cautious.
In New York, the Dow Jones Industrial Average fell 0.27%, the S&P 500 fell 0.41% and the Nasdaq Composite fell 0.7%. Those declines reflect investor anxiety around the fiscal cliff and contributed to a cautious tone in global and Australian markets.
Investors should watch the Reserve Bank of Australia minutes from the December board meeting (due Tuesday) and the Westpac–Melbourne Institute leading index of economic activity (due Wednesday). The article also reminded readers that the RBA cut the cash rate by 25 basis points to 3.0% at its December meeting.
The article notes ANZ, DuluxGroup and Incitec Pivot among companies holding annual meetings this week. Annual meetings can provide updates on company performance, strategy and governance — information shareholders often use when assessing holdings.
Yes. The Australian Competition and Consumer Commission (ACCC) was expected to issue determinations on Qantas Airways' proposed alliance with Emirates and on carsales.com.au's deal with the Telstra-owned Trading Post. Those decisions could affect the companies involved and have broader market implications.
The Australian dollar finished weekend trading at US105.72¢, up from US105.44¢ at Friday's close. The article also notes Australian stocks had risen about 2% so far in December, despite the cautious outlook around the US fiscal negotiations.
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