With US shares recording their largest drop in a month on Friday evening, the Australian share market is looking at another weak start to welcome the new trading week. The S&P 500 has now seen losses in eight of the last ten trading sessions, leaving it at a crucial juncture around the 50-day moving average ahead of key central bank commentary this week.


Economic calendar and news

The local economic agenda for the week ahead is light, with minimal data being published, other than the latest readings on manufacturing and services activity, business conditions for September, new home sales and ABS payroll data.

That will almost certainly be upstaged by focus on the minutes from the most-recent RBA Board meeting. Australia’s central bank recently decided to proceed with tapering its weekly bond purchases from $5 billion to $4 billion, despite concerns around the employment landscape and an expected sharp drop in GDP growth this quarter. Governor Philip Lowe was also on record last week indicating that the bank does not foresee rates increasing until 2024.

Overseas, the Federal Reserve will convene for its September Board meeting. The key topic for the meeting is expected to be taper talk, with a number of economists believing this meeting will be used to discuss and potentially signal the easing of bond purchases by the end of the year.

Given the delicate state of the markets over the last fortnight, not to mention recent employment numbers that came in ‘soft’, these concerns could hold some sway over the communications pushed out to the market and delay any announcement until November. 

Nonetheless, the Fed will publish its quarterly forecast, which will include its revised ‘dot plot’ interest rate outlook, as well as new economic forecasts. These have the potential to be price-sensitive events if the Fed accelerates its interest rate forecasts to an earlier time in 2023 or even 2022. As the Fed has sought to distance the connection between rates and tapering, an accelerated timeline for the first interest rate hike could unsettle markets and create uncertainty.

Another concern ahead might be how the US government deals with the debt ceiling, with an extension required before October, at which point without action the government would be expected to run out of money.



Stocks on watch

Iron ore prices have been hammered lately, now circling around US$100 per tonne. In turn, this has had a profound impact on the major miners that represent a significant portion of the ASX. China’s move to curb steel production has seen demand for iron ore sag.

Some analysts expect China could look to keep production subdued until after the Winter Olympics in February next year, with emissions being one factor, and some speculating geopolitical tension being an additional issue that could indicate a broader change altogether. Stocks like Fortescue Metals (ASX: FMG), Rio Tinto (ASX: RIO), BHP (ASX: BHP) and Mineral Resources (ASX: MIN) are among those on watch this week.

A number of US names will publish quarterly earnings reports this week, including the likes of Adobe (NASDAQ: ADBE), FedEx (NYSE: FDX), Nike (NYSE: NKE) and Costco (NASDAQ: COST). With the exception of Adobe, the other trio are likely to show the impact of how the American supply chain and consumer are faring in the midst of the economic recovery currently unfolding.

Meanwhile, back on home soil, Transurban (ASX: TCL), via its Sydney Transport Partners consortium, is set to fork out more than $10 billion to acquire full ownership of Sydney motorway company WestConnex. Transurban already holds a 51% stake in the company, and will acquire the remaining portion from the NSW government, which launched an auction for the stake around six months ago. The company will tap the market for billions of dollars in funding to complete the acquisition.

Making new highs last week were stocks such as Liontown Resources (ASX: LTR), Telix Pharmaceuticals (ASX: TLX), IPH (ASX: IPH), Cettire (ASX: CTT), and AVZ Minerals (ASX: AVZ)

In terms of momentum stocks on the short end of the stick, Fortescue Metals hit a 52-week low, but it wasn’t the only name under pressure as Evolution Mining (ASX: EVN), AGL (ASX: AGL), AMP (ASX: AMP), Regis Resources (ASX: RRL), Deterra Royalties (ASX: DRR), and Appen (ASX: APX) also touched yearly lows.


SelfWealth Ltd ACN 52 154 324 428 (“SelfWealth”) (Australian Financial Services Licence Number 421789). The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. Taxation, legal and other matters referred to on this website are of a general nature only and should not be relied upon in place of appropriate professional advice.