ASX set to edge higher as US Tech Stocks Rally

Stock Markets

Australian shares are poised to open higher today following a broad rally in US technology stocks overnight. Commissioner Hayne’s final report was released after yesterday’s market close. Although the report has caused damage to the reputations of Australian banks, it does not make any clear-cut threats to the core money-making operations of banks apart from higher remediation, compliance and legal costs. The report stopped well short of investor fears of forcibly separating banks from financial advice divisions or making a strict blue-print for how bankers are paid. As such, it is unlikely that the big four banks will be shaken from the report since the reports’ main findings have already been largely factored into the stock price of the big four banks. This is evident in the relentless short selling pressure throughout the Australian banking sector over the past few months as investors positioned themselves ahead of the release of the report. Australian investors are up for a busy week of RBA activity with a policy meeting today, a Wednesday speech by the governor and Friday’s updated forecasts in the bank’s Statement on Monetary Policy.

Wall Street’s main benchmarks closed in positive territory as US technology stocks rallied overnight.  The Dow Jones, S&P 500 and NASDAQ 100 were all up overnight, with the indices gaining 175.48 (+0.70%), 16.87 (+0.62%) and 84.44 (+1.23%) points respectively.

Australian miners are expected to benefit from base metal prices rallying last week and the continuation of the rally in iron ore. ASX 200 futures are currently up 39.0 points. 

Today’s news releases: RBA policy decision at 2.30pm AEDT

Commodities and Currencies

Brent crude prices have extended their rally in the past few days as Venezuela’s oil production is likely to fall by 18% due to pressure from US sanctions and lack of materials for workers. Brent crude prices fell marginally to $US62.69 (-0.1%) a barrel.

Iron ore prices continued their rally following another unfortunate tailings dam disaster at a Vale-owned mine in Brazil. Iron ore is currently flat at $US85.53 per tonne. Although iron ore is expected to extend its rally, most analysts expect it to fall back into its 2018 trading range as the focus returns to rising global supplies and falling Chinese demand for steel-making material.

The spot price of gold is down 0.43% and is now hovering around US$1316.45.

The AUD is currently down 0.4% to US72.22¢.

This article was written by Mithun Fernando – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via mithun.fernando@rivkin.com.au or by phoning +612 8302 3633.