After US stocks recovered losses to close sharply higher on Friday night, the Australian share market is expected to take confidence and open on a positive note this morning. Offshore cues are likely to lead trading this week, including jobs data, inflation concerns, the US debt ceiling, Treasury yields, geopolitical tension, plus China’s Evergrande.


Economic calendar and news

The Reserve Bank of Australia will meet for its monthly Board meeting this week. As its counterpart in the US prepares to follow suit and wind back its quantitative easing program, Australia’s central bank is not expected to update its thinking around interest rates, sticking to a longer-term forecast that sees rates at rock-bottom levels until 2024. The uncertainty around the employment market and wage growth in light of lockdowns, as well as below-target inflation have been cited as reasons why the RBA does not plan to adjust rates any time soon.

Elsewhere, the Balance of Trade from August will be published, and while iron ore prices have been floundering in recent weeks as demand from China plummets, national exports are still expected to show a modest increase as coal exports have sought to minimise that shortfall.

In the US, the first-half of the week will mostly be light for data on the economic front, limited mostly to numbers on imports and exports, plus factory orders

However, the latest employment figures due on Friday US-time will paint a clearer picture around the state of the jobs market. Economists believe nearly half a million jobs were added to the US economy in September, which if true, is forecast to reduce the unemployment rate to a pandemic-era low of 5.1%.

At the same time, political wrangling will also take centre stage, as President Biden’s infrastructure bill hit a wall and came to defeat last week amid debate over an accompanying social and environmental spending package. The deadline has now been shifted to the end of the month, in the meantime setting an uncertain backdrop.



Stocks on watch

Tesla (NASDAQ: TSLA) reported third-quarter numbers over the weekend, unveiling production of 237,823 vehicles and 241,300 deliveries in the September quarter. The overwhelming majority of cars manufactured by the company over the period were its Model 3 and Y cars, which sell at a more affordable price compared with other names in the company’s line-up. It comes at a time when rivals Lucid (NASDAQ: LCID) and Rivian kick-start production as the US seeks to step up its transition to EVs.

On that note, with Rivian filing to go public via IPO, Amazon (NASDAQ: AMZN) is one stock that might be watched closely in the coming days. The e-commerce giant has a stake of more than 5% in the up-and-coming EV-maker, while it is also one of its major customers, with commercial delivery vans produced on its behalf by Rivian.

In big news to end last week, pharmaceutical giant Merck (NYSE: MRK) announced positive findings from its phase three trial of an oral antiviral treatment designed to mitigate the impact of COVID in mild and moderate cases. The company’s drug, molnupiravir, reportedly decreased the risk of hospitalisation or death by about 50% in trials, with Merck now planning to seek emergency use authorisation from the FDA before submitting marketing applications in other jurisdictions. Shares in MRK leapt over 8% in the final trading session of last week, at one stage recording a yearly high.

Closer to home, travel stocks have been one of the favoured trends in recent weeks, which comes as New South Wales is tipped to hit the 70% double vaccination mark for those aged 16 years and older. With expectations the state will hit 80% shortly thereafter, opening the way for intrastate and even potentially international travel within the coming weeks, stocks such as Flight Centre (ASX: FLT), Webjet (ASX: WEB), Corporate Travel Management (ASX: CTD) and Qantas (ASX: QAN) all hit 52-week highs at various stages last week.

In terms of momentum trades, South32 (ASX: S32) hit new heights on the back of acquisition news last week giving it greater aluminium exposure, Yancoal (ASX: YAL) and Whitehaven Coal (ASX: WHC) both hit yearly highs on record coal prices, and IDP Education (ASX: IEL) achieved the same feat as investors grow optimistic about the return of some international students by the end of the year.


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