InvestSMART

US jobs data most likely to push bourse higher

Australian shares are expected to open modestly firmer as investors react to Tony Abbott's election victory and moderate US employment growth.
By · 9 Sep 2013
By ·
9 Sep 2013
comments Comments
Australian shares are expected to open modestly firmer as investors react to Tony Abbott's election victory and moderate US employment growth.

But the incoming government's pledge to repeal the mining tax is not expected to boost BHP Billiton and Rio Tinto on Monday.

CommSec chief economist Craig James said finance groups offering novated car leasing, such as McMillan Shakespeare, are more likely to move higher as investors warm to a Coalition pledge to reverse Labor's tightening of fringe benefit tax rules.

"It had been rallying on the expectation of a Coalition victory so there may be some further modest gains for the FBT and packaging-type companies," he said. "They're the main short-term beneficiaries."

The pledge to repeal the mining tax is unlikely to help the resource giants since Labor's policy raised far less than the $2 billion it was forecast to amass in its first year. "Really, the mining tax hasn't been a great earner for the government anyway so it's not a major consideration for the major miners," Mr James said.

With a Coalition victory already factored in, investors are more likely to react to US Labour Department data showing 169,000 non-farm jobs were created in August.

While the American unemployment rate fell to 7.3 per cent, the lowest since December 2008, the increase in payrolls was below market expectations of 177,000 new jobs, which contributed to a flat finish on Wall Street on Friday night.

But the Australian market is expected to post a 10 to 20-point increase as investors see the modest US jobs growth as a positive sign.
Google News
Follow us on Google News
Go to Google News, then click "Follow" button to add us.
Share this article and show your support
Free Membership
Free Membership
InvestSMART
InvestSMART
Keep on reading more articles from InvestSMART. See more articles
Join the conversation
Join the conversation...
There are comments posted so far. Join the conversation, please login or Sign up.

Frequently Asked Questions about this Article…

The article says Australian shares were expected to open modestly firmer as investors reacted to Tony Abbott's election victory. The market had largely factored in a Coalition win, so the immediate move was cautious optimism rather than a big rally.

According to CommSec chief economist Craig James, the pledge to repeal the mining tax was unlikely to help major miners such as BHP Billiton and Rio Tinto on Monday. He noted Labor's mining tax raised far less than originally forecast, so repealing it wasn't seen as a major consideration for the big resource companies.

Finance groups that offer novated car leasing, like McMillan Shakespeare, and other FBT and packaging-type companies were seen as more likely to move higher. Investors were warming to the Coalition pledge to reverse Labor's tightening of fringe benefit tax rules, which could be a short-term benefit for these businesses.

The US Labour Department reported 169,000 non-farm jobs created in August and the unemployment rate fell to 7.3%, the lowest since December 2008. Payrolls were below market expectations of 177,000, which contributed to a flat finish on Wall Street. Australian investors were expected to view the modest US jobs growth as a positive sign, supporting a small rise in the local market.

Wall Street finished flat after payrolls rose by 169,000 in August, below the 177,000 expected. The lower-than-expected payrolls tempered enthusiasm despite the unemployment rate falling, resulting in a muted US market reaction that still left some support for Australian shares.

The article noted the Australian market was expected to post a modest increase of about 10 to 20 points, as investors interpreted the modest US jobs growth and the election outcome as mildly positive for markets.

Craig James pointed out that Labor's mining tax raised far less than the $2 billion originally forecast for its first year. Because it hadn't been a significant revenue earner, repealing it wasn't expected to materially change the outlook for major miners.

The article suggests investors shouldn't expect big immediate gains for major resource stocks like BHP Billiton and Rio Tinto from the pledge to repeal the mining tax. Market reaction was expected to be modest, with potentially stronger short-term moves in niche areas such as FBT-related and packaging companies.