Australian sharemarket set to rise despite US volatility

The Australian sharemarket is tipped to open in positive territory on Monday despite weak overseas leads.

The Australian sharemarket is tipped for a positive start to the week. Picture: Getty Images

The Australian sharemarket is tipped to open in positive territory on Monday despite weak overseas leads, as investors brace for a volatile week that includes a near-certain rate cut from the Reserve Bank and the chance of a delayed result in the US presidential election.

SPI futures are pointing to a 0.9 per cent, or 52 point, rise at the open at the start of the week, with iron ore majors expected to find support through the session. Positive Chinese PMI results are also expected to add to the positive sentiment.

The prospect of a positive day of trade comes after the local sharemarket dropped more than 3 per cent last week, while US equities markets fell more than 5 per cent.

The big ticket items in the coming days are the RBA rate decision on Tuesday and the US election, with polls opening late on Tuesday evening AEDT.

Some industry experts are sceptical the market will open just shy of 1 per cent higher on Monday. “I doubt it will rise that much because I think notwithstanding the fact that you have an expected RBA rate cut on Tuesday, there will be ongoing nervousness about the rising number of coronavirus cases in Europe, in the US and the UK,” AMP chief economist Shane Oliver said.

A fresh lockdown in Britain, adding to the lockdowns in France and Germany among others, was likely to weigh on sentiment, he said. “And I think nervousness about the election in the US might also weigh a little bit on US futures, which might also might work its way into our market through the course of the day,” Mr Oliver said.

The local sharemarket finished Friday’s session down 0.55 per cent at 5927.6, while in the US, the Dow Jones slipped 0.6 per cent and the S&P500 fell 1.2 per cent. The Nasdaq dropped 2.5 per cent as Apple, Amazon, Facebook and Twitter were heavily sold.

CommSec chief economist Craig James is expecting a degree of caution from investors until the US election result is known.

“It would be a game investor who would take significant positions on the Monday and Tuesday before the election. So we could be in the calm before the storm. And then we’ll just have to wait and see.”

The more positive US election outcome for the markets would be a blue wave, he said.

“This is where we basically see Biden win the presidency as well as Congress, and that way he would have the potential to be able to implement policies, particularly what we’re expecting, given that the Democrats in the House have been pushing very much for a stimulus package.”

The travel sector would remain under pressure in the near term given the fresh lockdowns in Europe, while higher iron ore and gold prices should serve as a positive start for the local market, Mr James said.

Westpac releases its full-year results on Monday, with analysts eyeing a weak set of numbers from the lender.

Westpac last week warned its cash earnings would take a $1.22bn hit due to writedowns, customer compensation and a record Austrac penalty.

Despite the hit, Morgan Stanley analyst Richard Wiles still expects Westpac to pay a final dividend of 25c a share.

“All else equal, our second-half 2020 estimated reported profit will be about 12 per cent lower,” he said. “After adjusting for these charges, our estimated final dividend of 25c would imply a second-half 2020 payout ratio of circa 57 per cent and a full-year payout ratio of circa 33 per cent.”