Wall St rally bodes well for ASX start

THE Australian sharemarket is tipped to open higher on Monday following strong US leads, with energy and gold stocks likely to shine ahead of a crucial Federal Reserve meeting later in the week.

SPI futures are pointing to a 0.2 per cent jump at the open after the S&P 500 hit record closing highs on Friday as investors took higher inflation numbers in their stride.

While the annual US inflation rate, at 6.8 per cent, was the highest since 1982, the 0.8 per cent monthly figure was not a significant acceleration and came in broadly in line with market expectations.

This provided reassurance that the US Federal Reserve will hold off hiking interest rates until mid-2022, driving US markets to record their best week since the first quarter.

The Dow recorded its biggest weekly percentage gain since March, while both the S&P 500 and Nasdaq had their best week since February.

Over the course of the week, the Dow jumped 4 per cent, the S&P 500 rose 3.8 per cent and the Nasdaq gained 3.6 per cent.

The positive lead sets the Australian market up for a positive start, although the gains will likely be more modest than overseas, CommSec senior economist Ryan Felsman said. “Part of the reason for that will be the iron ore price has come off a little bit; there are concerns around oversupply in China once again,” he said. “And investors are still digesting the news that Elizabeth Gaines, the CEO of Fortescue, has stepped down, so there could be a little bit of uncertainty around that stock in particular.”

The iron ore price was last down 3.8 per cent amid the China demand concerns, and trading at $US102.60 a tonne.

“We also saw industrial metals off a little bit too. So that could be a bit of a weight on the local market,” Mr Felsman said.

But rising gold and oil prices would provide a degree of support, he added.

Both Brent and US Nymex prices rose 1 per cent on Friday to be trading at $US75.15 and $US71.67 a barrel, posting their strongest week since August, with an 8 per cent gain.

Looking ahead, all eyes will be on the US Federal Reserve, which holds its last meeting of the year this week. Fed chairman Jerome Powell recently flagged the central bank may discuss speeding up the pace of tapering its bond-buying program at the meeting.

Back at home, Thursday’s November labour market report will be closely watched, while NAB, ANZ and Westpac all hold their annual meetings.