Share market will open higher on slowing inflation
THE local share market is expected to open higher on Monday amid signs aggressive interest rate rises are beginning to rein in inflation and investors look through higherthan-expected job data and shrug off ongoing dramas in the cryptocurrency market.
ASX futures are pointing to a 0.3 per cent gain to 7192 points following a tumultuous week on international share markets as investors gauged the outlook for interest rates.
US shares closed higher on Friday – with the S&P 500 firming 0.5 per cent to 3965.34 – but for the week were down 0.7 per cent. It followed a 6 per cent rally the previous week amid hopes that the Federal Reserve will slow down the pace of its 0.75 per cent interest rate hikes but that expectation has dimmed as labour and retail sales data remain strong.
The S&P 500 is about 11 per cent higher than its low in mid-October, while US home sales have risen for the ninth consecutive month as higher borrowing costs bite. Meanwhile, AMP Capital chief economist Shane Oliver said trying to unravel what went wrong at FTX CEO Sam Bankman-Fried’s crypto exchange, which filed for bankruptcy last week, would take a while. “The key for investors is not to invest in things: where the use case is unclear and value is very hard to determine; where the investment is so complex you can’t understand it; and where the case for it rests heavily on past performance,” he said.
Reserve Bank of Australia deputy governor Michele Bullock has hinted at a pause in rate hikes but the release of strong jobs data indicates rates will lift 0.25 per cent in December before a break in January.
Dr Oliver said a pause in rates was likely early next year.
“Strong September quarter wages growth and jobs data for October along with the absence of an RBA meeting in January suggest that a pause is unlikely in December though and we continue to expect another 0.25 per cent rate hike but a pause is likely from early next year where we expect the cash rate to peak at 3.1 per cent – or if not then at 3.35 per cent,” Dr Oliver said.