Australian sharemerket tipped to fall after weak US lead

The Australian sharemarket is set for a negative start on Monday following weak overseas leads, with most sectors eyeing a muted session.

The Australian sharemarket is expected to start the week in negative territory. Picture: NCA NewsWire / David Swift

The Australian sharemarket is set for a negative start on Monday following weak overseas leads, with most sectors eyeing a muted session amid a lack of support.

SPI futures are pointing to a 0.5 per cent drop at the open, in line with the declines seen on European markets at the end of last week, while US markets nursed even greater losses on Friday, ending a recent winning streak on faltering consumer sentiment.

“If we’re going to get any support, it’s going to be fairly difficult to find. It’s hard to see a saviour in the mining or the energy space,” CommSec economist Craig James said.

The oil price rose only slightly on Friday to $US71.80 a barrel, while gold slipped $US14 to $US1815 an ounce.

While the iron ore price slipped on Friday, it was up more than 2 per cent over the week following data from China that showed its economy continued to perform well, supporting the demand for raw materials.

Amid expectations the iron ore price may be on a downward trend, Mr James said prices were likely to come down “very slowly” over the next 12 to 18 months.

The financial sector is also facing a muted start to the week.

“If you look at longer-term interest rates, which are a fairly good guide to the financial sector, two years and 10-year yields were flat in the US, so little change happening there.

“What’s happened over the past week in the US is, while the big banks have come out with reasonable results, what’s held them back is the fact that longer-term bond yields have come down and generally the financials trend higher when yields and interest rates are moving higher.”

This has held the financials back, not just in the US, but also in Australia, Mr James warned.

Goldman Sachs last week reported quarterly profit of $US5.49bn, while peer JPMorgan posted profit of $US11.95bn. While both results beat expectations, analysts remain concerned about warning signs, including new Covid variants and signs the bond market is signalling a slower economic recovery.

On the data front, RBA minutes from its latest meeting are due to be released on Tuesday, with market watchers keen for any further information on its move to slow bond buying.

June retail sales are out on Wednesday, with AMP chief economist Shane Oliver tipping a 1 per cent fall.

Originally published as Australian sharemerket tipped to fall after weak US lead