ASX set to open lower on lingering concerns about a global growth slowdown

Stock Markets

Australian shares are set to open lower on renewed concerns about a slowdown in global growth which was highlighted by the IMF’s warning about the global economy weakening at a “faster than expected” rate. This has generally triggered weakness in the markets although shares on Wall Street bucked this trend, closing higher on Wednesday, after a session of fluctuating from positive through negative as investors sought to position themselves for slower economic growth. The Dow Jones and S&P500 both closed in the green, with the indices rising 171.14 (+0.70%) and 6.38 (+0.24%) points respectively. Strong earnings from IBM and other US blue-chips acted to negate the effects of negative news headlines keeping the Dow Jones afloat on Wednesday. The labour market report is expected to be released today and will provide vital information on the employment change and the unemployment rate in Australia. ASX 200 futures are currently up 11 points. 

Commodities and Currencies

Brent crude prices have benefited from hopes that OPEC will manage to achieve production cuts and easing trade tensions between the US and China. Brent crude is currently experiencing a small pullback after hitting a new recent high of US$63.13 on Tuesday and is sitting at US$60.92 (-0.03%).

The spot price of gold is up about $1.55 and is now hovering around US$1281.85. From a technical perspective, it still remains in its medium-term uptrend despite the recent pullback.

The AUD edged 0.3% higher to US71.42¢, however it is still more that 12% lower than a year ago when it last traded above US80¢. The long term outlook for the AUD seems grim as Capital Economics downgraded its forecast for Australian interest rates, saying that the Reserve Bank would be forced to cut its key rate to 1% from 1.5% on the back of the weakening local housing market.

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.