Bloodbath on Wall St puts fear in local bourse

THE Australian sharemarket is set for a rough start to the week after a brutal sell-off on Wall Street on Friday night, with investors bracing for a sea of red ahead of crucial rate-setting meetings by the Reserve Bank and US Federal Reserve.

US stocks skidded more than 2.7 per cent in the last trading day of the week, marking the worst month for the Dow Jones Industrial Average and S&P 500 since March 2020, and the Nasdaq’s biggest monthly plunge – at 13.3 per cent – since October 2008.

Tech stocks were hit by worse-than-expected results from Amazon, as well as a warning on rising costs from Apple, while inflation data also weighed on the broader market. With technology stocks bearing the brunt of the pain in the US, Australia’s sharemarket is set for a milder setback, with SPI futures pointing to a 1.3 per cent drop at the open.

CommSec chief economist Craig James said gold and copper miners may temper some of the losses, while a lower Australian dollar will boost sentiment from offshore buyers.

“We haven’t got those big technology sectors they have in the US, so that will provide some sort of support, and a lower Australian dollar is good news for buyers of our share market from overseas and so that’s positive as well,” Mr James said. “A lower Australian dollar is also good for our exporters.”

The RBA meets on Tuesday and could lift rates for the first time in more than a decade, and the US Federal Reserve also meets this week.

“It’s basically a coin toss on whether we get movement in May or June,” Mr James said of the RBA. “Our major concern is the Reserve Bank has been constantly saying that it wants to see evidence of higher wages before lifting interest rates and we don‘t get the wage data until mid May.”