Weakness in overseas equities markets means Australian futures are pointing to a downbeat start to the new trading week. There was some strength amid tech names, and lockdown stocks may be in focus over the coming days as another wave of COVID cases hit Europe and the US.
Economic calendar and news
Arguably the biggest news item over the coming days, US President Joe Biden is expected to make a decision as to the future tenure of Federal Reserve Chair Jerome Powell, where a surprise decision could set the scene for volatility.
Having guided policy right through the pandemic, and in the eyes of some, single-handedly fuelling the near-unprecedented stock market rally over the last 18 months, Mr Powell faces a decision on whether he is kept on or replaced by a new Chair after his term expires in February.
A number of Democrats have lent support to another candidate in Lael Brainard, who some industry onlookers believe could be even more ‘dovish’ when it comes to monetary policy, potentially setting the path for a slower interest rate trajectory. Furthermore, there is growing pressure from the same group to adopt a tougher approach towards regulating the major banks, among other options.
Elsewhere, the market will be watching data on the latest manufacturing and services activity for November, durable goods orders for October, a second reading on third-quarter GDP, and the latest inflation reading tied to the personal consumption expenditure index.
It’s a somewhat similar story for the local scene, however, a host of speeches from Reserve Bank of Australia figureheads could shed more light on the central bank’s views surrounding inflation and interest rates.
Stocks on watch
On the back of lockdowns and newly-imposed COVID restrictions in Europe, the price of oil suffered its worst week since August. It comes as concerns centre on demand for oil in the wake of the latest wave of COVID cases that have forced several countries to curtail freedoms.
At the same time, supply is tipped to be added back into the market, with the US and China both understood to be considering releasing strategic reserves of crude oil. Price action has seen names like Woodside Petroleum (ASX: WPL) and Beach Energy (ASX: BPT) drop to their lowest levels in almost two months.
COVID taking hold across the northern hemisphere may also weigh on travel stocks, including international names, as well as ASX-listed players exposed to overseas markets. This includes the likes of Qantas (ASX: QAN), Webjet (ASX: WEB) and Flight Centre (ASX: FLT). This week would typically represent the biggest week for travel in the US, owing to Thanksgiving, so there may be some updates on passenger numbers that would reflect on the broader industry.
At the same time, concerns around lockdowns may divert some buying interest to tech names, which performed well in overseas trading last Friday. Mega tech names such as Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT) and Meta Platforms (NASDAQ: FB) were all star performers in the midst of the pandemic last year given their connection to the digital economy, and may be seen as ‘safety’ trades or a hedge against the risk of further lockdowns breaking out across Europe and the US.
Iron ore ended last week on a bright note, with the commodity gaining more than 5%. Although well off its highs from earlier this year, prices have seemingly traded in a tighter range across the last few weeks. That has helped provide some support for the likes of Fortescue Metals Group (ASX: FMG) and Rio Tinto (ASX: RIO), however, these stocks are likely to remain tied to price movements in the commodities market over the coming trading sessions.
Fresh off recent dips, both ASX (ASX: ASX) and Altium (ASX: ALU) made all-time highs last week, and they weren’t the only ones, with Macquarie Bank (ASX: MQG) following suit. That came despite a heavy sell-off among the Big Four, which suggests some investors may have rotated out of those household banks in favour of the diversified investment bank.
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