Source : THE AGE NEWS
By Rita Nazareth
Australia’s sharemarket is expected to open flat on Monday after a positive end to the week on Wall Street, as investors await this week’s inflation data, which is tipped to support a cut in official interest rates.
Futures are pointing to a rise of 2 points or 0.02 per cent in the ASX 200 on Monday morning, after a solid Wall Street week ended with gains for stocks.
A surge in megacaps sent the S&P 500 above 5,500 points, with the gauge notching its longest advance since January, while bonds and the US dollar rose. Tesla jumped 9.8 per cent while Alphabet climbed on solid results. Equities briefly lost steam as Trump suggested another delay to reciprocal tariffs was unlikely, and he wouldn’t drop levies on China without “something substantial” in return.
Wall Street closed the week higher, helped by a rise in tech giants Tesla and Alphabet.Credit: Bloomberg
“Markets have staged an impressive recovery,” said Mark Hackett at Nationwide. “While fears of a 2008- or 2020-style crisis are fading, the road back to record highs won’t be easy. Markets are showing resilience, but still face the same persistent challenges, including tariff uncertainty and signs of an economic slowdown.”
When the ASX last traded on Thursday, before Friday’s Anzac Day public holiday, it rose 0.6 per cent. The Australian dollar was trading at 63.91 US cents on Monday morning.
In Australia this week, a key event for markets will be Wednesday’s release of the March quarter consumer price index, which economists expect will show inflation was in the Reserve Bank’s 2 to 3 per cent target band. Investors are betting the RBA will cut interest rates at its next meeting on May 20.
On Friday in the US, worries about the economic fallout from tariffs drove US consumer sentiment to one of its lowest readings on record while long-term inflation expectations climbed to the highest since 1991.
President Trump’s administration has drafted a framework to handle negotiations with trading partners rushing to secure deals to avert tariff hikes, according to people familiar with the matter.
As profit margins remain close to record levels, Corporate America has some room to absorb costs from higher tariffs. However, the track record of S&P 500 companies over the past two decades suggests their ability to withstand additional levies is fragile, at least by one measure.
Nearly all of the margin growth eked out from corporate sales on the gauge since 2004 has come from the booming technology sector, according to Bloomberg Intelligence. Removing the group, profitability barely rose.
“The tariff-induced slowdown in economic activity, as well as the higher costs, will crimp corporate profit growth,” said David Lefkowitz at UBS Global Wealth Management. “But the economy should rebound next year as businesses and consumers adjust to the tariffs, with an assist from Federal Reserve rate cuts and certainty on tax policy.”
Bank of America Corp. strategists led by Michael Hartnett warned that the conditions for sustained gains in US stocks and the dollar are missing.
The greenback is in the midst of a longer-term depreciation while the shift away from US assets has further to go, they noted. The trend would continue until the Federal Reserve starts cutting rates, the US reaches a trade deal with China and consumer spending stays resilient.
Foreign investors have sold $US63 billion ($98.6 billlion) of US equities since the start of March, Goldman Sachs Group Inc. strategists estimate, noting that the data from high-frequency fund flows suggest that European investors have been driving the selling, while other regions have continued to buy US stocks.
Forecasters anticipate the trade war will hit economic growth this year and next as tariffs push prices higher and put a dent in consumer spending.
The US economy is set to expand 1.4 per cent in 2025 and 1.5 per cent in 2026, according to the latest Bloomberg survey of economists, compared with 2 per cent and 1.9 per cent in last month’s poll. The median respondent now sees a 45 per cent chance of a downturn in the next 12 months, up from 30 per cent in March.
All up, the S&P 500 rose 0.7 per cent, the Nasdaq 100 rose 1.1 per cent and the Dow Jones Industrial Average was little changed.
