The ASX Today

The ASX is expected to open lower in light of Government issues and global markets reversing their recent rallies at the end of last week.

The ASX is expected to open lower in light of Government issues and global markets reversing their recent rallies at the end of last week.

The resignation of John Alexander over the weekend from Australian Parliament could also weigh on the local index. We now have a minority Liberal/National government. A rudderless government is likely to take a toll on business and/or consumer confidence, and if we head for early election, history suggests that probably won't support the market either over the medium-term. 

ASX SPI 200 Futures are indicating a flat open, down 1 point from Friday's close, but that was before the above unfolded.

After a week of climbing vertically, local equities may therefore be set for a pullback. The Dow finished 0.17 per cent lower, the S&P 500 finished 0.1 per cent lower, and the Nasdaq was relatively flat, down just 0.05 per cent. 

KEY POINTS

  • Global equities closed lower Friday, directing the ASX to a lower open
  • Energy sector falls, oil price slips a little, tension in the Middle East has an impact
  • Financials marginally lower overseas, expect some big bank selling locally today though
  • Materials sector little impacted, closing down 0.2 per cent on S&P 500, but base metals rise by up to 1.2 per cent on London Metals Exchange

In dividend news, Westpac goes ex-dividend today, so expect some selling pressure there like we saw in NAB late last week.

RBA Deputy Governor Guy Debelle will speak today on business investment in Australia, and we also get credit and debit card lending data. The market-moving data for the week includes the NAB business survey on Tuesday and Westpac consumer sentiment survey on Wednesday.

The Australian dollar is under pressure still at 76.57c, but with the US dollar coming under pressure, the Aussie could be building a base for a new rally. Data coming out this week will determine the direction, particularly employment in the second half of the week.

In the US, there seems to be irreconcilable differences between the Senate and House of Representative which is straining tax reform developments there and weighing on equity markets. This has been a boon to bond markets. Reuters noted that investors “closed out some curve-flattener positions and dealers reduced their holdings of longer-dated debt following this week's auctions”. US 10-year bond yields climbed by 7 basis points to 2.4 per cent after drifting lower throughout November.

Lebanon has intervened with the tensions in the Middle East and picked a fight with Iran in the Iran v Saudi Arabia battle. Risks are growing, and to be watched, but oil prices haven't suffered too much at the helm just yet. Oil closed off its highs on Friday with WTI at $US56.74 and Brent crude at $US63.52 a barrel.

And in Europe, markets have been making their own reversals. European shares ended the worst week since August with the pan-European STOXX 600 index down 0.4 per cent on Friday. Softer earnings growth and uncertainty on US tax reform prompted profit-taking, according to CommSec. The German Dax fell by 0.4 per cent and the UK FTSE lost 0.7 per cent. But our big miners were mixed in London trade, with shares in Rio Tinto rising by 0.5 per cent and BHP falling by 0.4 per cent.

Market Summary: 
IndexLastPoints ( /-)Change (%)
Dow23,422.21-39.73-0.02
S&P 5002,582.30-2.32-0.09
Nasdaq6,750.940.890.01
FTSE 1007,432.99-51.11-0.68
DAX13,127.47-55.09-0.42

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