ASX 200 tipped for negative start despite strong US leads, as investors brace for RBA

The Australian sharemarket is tipped to open in the red on Monday as investors count down to the Reserve Bank’s monthly rate-setting meeting.

The S&P/ASX 200 index is expected to open lower on Monday. Picture: AAP

The Australian sharemarket is tipped to open in the red on Monday despite strong leads from the US, but iron ore and energy stocks could provide a degree of support as investors count down to the Reserve Bank’s monthly rate-setting meeting.

SPI futures are pointing to a 16-point, or 0.2 per cent drop at the open, pushing the index further below 7000 after it clawed back 2 per cent in Friday’s session to close at 6988.1.

The poor start comes after US sharemarkets ended Friday’s session in the black after a swing late in the day, pushing the Dow and S&P 500 into positive territory for the week.

“It’s quite unbelievable that they were higher on the week given all the volatility and extended downturns,” CommSec chief economist Craig James said.

“I think what we’re seeing is the fact that inflation is an issue that will lead to higher interest rates and investors are positioning themselves while considering how high rates will go, how far apart they’ll be, how aggressive they’ll be. So they’re positioning due to the change in circumstances.”

Ahead of the RBA meeting on Tuesday, which will see investors look to glean any hint of rate hike timing locally, the market will come under pressure in the first trading session of the week, Mr James warned.

“Futures are pointing slightly lower on Monday and that’s largely because Australia got in early with its substantial gains on Friday. Effectively, Asia led the way in the upturn,” he said.

Gold’s 2.5 per cent decline over last week will pressure gold miners, but the higher oil price will give a boost for energy stocks, he predicted.

WTI crude rose 0.2 per cent on Friday, to $US86.82 a barrel, while Brent jumped 0.8 per cent to $90 a barrel and is now hovering at around seven-year highs.

Iron ore miners should also fare well in Monday’s trade following a lift in the iron ore price, Mr James added.

The iron ore price surged by $US9.15, or 6.6 per cent, to $US147 90 a tonne on Friday.

On the data and economic front, Tuesday’s RBA meeting is the big ticket item. CommSec, like others, has pushed forward its rate hike expectations to an August lift-off, and onlookers will be watching for any hints from the central bank on the need to hike sooner when the board hands down its interest rate decision.

Reserve Bank Governor Philip Low addresses the National Press Club on Wednesday, and then week rounds out with the Statement on Monetary Policy, due on Friday.

Originally published as ASX 200 tipped for negative start despite strong US leads, as investors brace for RBA