Market set to dip ahead of GDP data

THE Australian share market is expected to dip slightly ahead of a big week of local economic data.

The futures market suggests the benchmark S&P/ ASX200 will fall 24 points at the start of trade today.

It comes after it closed on Friday down 95.4 points, or 1.63 per cent, to 5755.7 points, while the All Ordinaries index fell 85.6 points, or 1.44 per cent, to 5872.2.

CommSec chief economist Craig James said investors were “proceeding with caution” after good gains on the share market nine out of the past 10 weeks.

“We’ve had good gains in April and May, it’s been a bit of a winning streak,” he said yesterday. “It may be the case investors have gotten a little ahead of themselves and that could see a degree of consolidation come into the market.”

Mr James pointed to the release of economic data this week, headlined by GDP figures on Wednesday, as another reason for the “pessimistic” futures reading.

The big question will be whether Australia can avoid a technical recession by recording a small increase in March quarter GDP.

“The consensus is that we’re likely to see a pretty flat reading for the economy for the March quarter. If we manage to achieve something like a very small negative or a small positive, I think we can have a degree of pride,” Mr James said, noting Australia has fared better than many other comparable countries amid the coronavirus pandemic.

The figures will not capture the full impact of the health crisis on the economy, as restrictions only began to ramp up during the final two weeks of the quarter.

The Reserve Bank of Australia also meets tomorrow, but there is unlikely to be any changes to policy even as data suggests the pandemic has delivered a slightly less disastrous hit to the economy than expected, Mr James said.

“There would be a degree of optimism in the markets when it comes to our progress on COVID-19, the number of new cases continue to remain low and we’re removing some of the lockdown restrictions from Monday,” he said.

Data on building approvals, exports, inventories, retail sales and public spending will also be released throughout the week.