ASX set for positive start; banks, miners to drive gains

The local share market is tipped to open higher on Monday, ahead of Tuesday’s federal budget, with the energy, iron ore and financial sectors expected to rise.

The Australian sharemarket has gained 6 per cent since March 8. Picture: NCA NewsWire / Gaye Gerard

The Australian share market is set for a positive start to the week following solid offshore leads, with the energy, iron ore and financial sectors expected to drive Monday’s gains.

SPI futures are pointing to a 0.4 per cent rise at the open as the local market powers ahead in its latest positive streak, building on the 6 per cent rise seen on the S & P/ASX200 since early March.

Following advances in oil and iron ore prices, as well as rising bond yields, the energy giants, iron ore miners and banks should fare well through the session, CommSec chief economist Craig James said.

“What we saw in the US (on Friday) was pretty much broadbased gains; everything was up except for technology stocks and the consumer discretionary sector,” Mr James told The Australian.

“Longer-term interest rates continue to push up … that’s generally seen as positive for the financial sector, specifically in terms of banks. And overall, there were good gains in the oil and iron ore prices as well.”

Oil prices jumped again on Friday, with WTI crude hitting $US113.90 a barrel, up 1.4 per cent, and Brent even higher at $US120.65 a barrel after also rising 1.4 per cent. Iron ore futures, meanwhile, gained 1.16 per cent to $US150.17 a tonne.

For the financial sector, rising US bond yields will translate to higher bond yields locally, Mr James said.

But there will also be some “casualties” through the day, he warned: “(Rising bond yields) are far less positive for growth-focused parts of our market such as the technology and consumer discretionary sectors.”

Gold miners are also expected to come under pressure following a drop in the gold price.

In the US on Friday, the Dow and S & P 500 finished the session in positive territory, but the Nasdaq fell amid a shrinking gap between long- and short-term US Treasury bonds.

The benchmark Dow Jones Industrial Average closed up 0.4 per cent at 34,861.24, while the broadbased S & P 500 rose 0.5 per cent to end at 4,543.06 and the tech-heavy Nasdaq slipped 0.2 per cent to 14,169.30.

While geopolitical risks remain elevated, the initial shock of the war in Ukraine has worn off, with investors stepping back in to push the market higher in recent weeks, Mr James noted.

Looking ahead, all eyes will be on the federal budget on Tuesday, while retail trade and building approval data will also be watched closely. Overseas, US jobs data is due on Friday.

Consensus expectations are for unemployment to decline to 3.7 per cent and for 450,000 jobs to have been created. According to NAB economist Taylor Nugent, focus will also be on average hourly earnings which are expected to tick-up to 0.4 per cent month-on-month after being flat in February.

“Markets are well priced for Fed rate hikes this year with 7.8 further hikes priced for the remaining six FOMC meetings in 2022, taking the Fed Funds rate to 2.25-2.50 per cent,” Mr Nugent said.

“This also means two 50-basis-point hikes are close to being fully priced for May and June. It is hard to see this week’s data altering that view substantially.”