Local bourse set for steady start amid nervous wait for Australian September inflation data

The local bourse is set for a low-key start to the week, as investors wait on inflation data that will play a major part in when the RBA decides to move on interest rates.

Investors will be eagerly watching inflation data for the September quarter due on Wednesday. Picture: NewsWire / Gaye Gerard

The Australian sharemarket is set for a cautious start to the week before the release of critical domestic inflation data on Wednesday that will help the Reserve Bank decide when interest rate cuts can occur.

Futures markets pointed to a 2 point drop on the ASX 200 at Monday’s opening after it fell 0.9 per cent last week – its first weekly decline this month.

The bourse rose 0.1 per cent to 8211.3 on Friday off the back of a 12.7 per cent surge in WiseTech Global as investors reacted positively to the resignation of chief executive Richard White, who will shift into a consultant role following controversy in his personal life.

AMP chief economist Shane Oliver said equity markets had hit a rough patch over the past week on concerns about valuations, amid rising bond yields. He said investors had reduced expectations for how much central banks, notably the Fed, would cut rates and priced in potentially higher US budget deficits if Donald Trump won the presidential election.

“This is potentially a threat to sharemarkets because high price to earnings multiples mean that the risk premium shares offer over bonds (measured by the earnings yield less the 10-year bond yield) is already very narrow compared to what it has been since the Global Financial Crisis,” he said.

On Wall Street, the S&P 500 was little changed after major banks including Goldman Sachs and JPMorgan Chase retreated after New York Community Bancorp warned of a weaker outlook. The tech-heavy Nasdaq rose 0.6 per cent on Friday, taking total gains for the year past 25 per cent, while the Dow Jones Industrial Average slid 0.6 per cent.

The Australian Bureau of Statistics on Wednesday will release inflation data for the September quarter, expected to show headline inflation rose 2.9 per cent in the year to September 30, compared to 3.8 per cent in the previous quarter.

Markets forecast that the RBA’s preferred gauge – trimmed mean – will be 3.5 per cent compared to 3.9 per cent. Despite warnings from the International Monetary Fund that Australia would have the second highest inflation rate among major economies in 2025, Dr Oliver remained confident that inflation would return to target by the end of next year.

“The rise in inflation from 3 per cent this year to 3.6 per cent next year that the IMF is forecasting is similar to the RBA’s forecasts and reflects the ending as currently legislated cost of living measures. Focusing on trimmed mean underlying inflation suggests a continuing fall next year,” he said.

“Our base case remains for the RBA to start cutting in February next year, but a cut in December still can’t be ruled out if September quarter trimmed mean inflation comes in as forecast and October monthly underlying inflation shows a further leg down.”

Global investors are busy positioning for either a Kamala Harris or Donald Trump presidency, with polls suggesting a nail-biting result. In the US, the focus this week will be on jobs data due on Friday, which is expected to show a slowing in payroll growth to 120,000 and unchanged unemployment at 4.1 per cent.

The dollar gave ground in the past week, down 0.6 per cent, on concerns that rates may not fall as much as expected in the US to be near US66.05c.

Brent crude – the international standard – gained 2.3 per cent to trade at US76.05 per barrel as investors mulled ongoing tensions in the Middle East, ceasefire negotiations between Hamas and Israel, and the US elections.

Originally published as Local bourse set for steady start amid nervous wait for Australian September inflation data