Bourse set to open lower after spike in COVID cases

The Australian sharemarket is expected to start the week in negative territory amid a global surge in COVID-19 infections

The Australian sharemarket is expected to start the week in negative territory, building on weak leads from US markets amid a global surge in COVID-19 infections.

Futures are pointing to a 1.3 per cent drop at the open on Monday after Wall Street swung into the red late on Friday as record COVID-19 cases were tallied in Florida and Arizona and tech giant Apple moved to temporarily shut 11 of its US stores.

“It’s not going to be a positive start for Australia and, of course, the big issue at the moment now is the concern around the second wave of infections, especially in the US,” CommSec senior economist Ryan Felsman said.

“In Australia, attention is also now being directed towards Victoria, with potential tightening of restrictions on the back of a pick-up in new cases.”

US sharemarkets had risen early on Friday after reports circulated that China was planning on increasing purchases of US farm goods following recent talks in Hawaii, but the positive sentiment quickly turned negative as COVID-19 took centrestage.

By the close, the Dow had swung a total of 500 points, closing 208 points, or 0.8 per cent, lower at 25871.46. The S&P500 slipped 0.6 per cent to 3097.74, while the Nasdaq finished up just 3 points at 9946.12. The S&P 500 quarterly rebalance contributed to the volatility, Mr Felsman said.

In a data-light week, comments from Reserve Bank governor Philip Lowe, who is due to take part in a panel discussion on the global economy and COVID-19 at the ANU Crawford Leadership For­um on Monday, will be closely watched.

Concerns about the growing virus numbers in Victoria, which on Saturday recorded its biggest jump in daily cases in two months, will also be watched for in sentiment ratings from ANZ and Roy Morgan on Tuesday.

Parts of the retail sector, meanwhile, could start the week under pressure after Australian Bureau of Statistics data on Friday showed that local retail sales surged 16 per cent in May to $4bn, which boosted the share prices of some retailers.

Among the favoured stocks were Nick Scali and Adairs, both of which provided trading updates last week that showed Australians continued to purchase homewares and furniture in the lockdown environment. Both comp­anies saw double-digit gains in Friday’s session.

“So there could be some give back in that sector,” Mr Felsman said.

“The other one to watch out for will be the materials sector. Certainly, we have seen a little bit of a loss of momentum in terms of commodity prices.”

Base metals have broadly been weaker on the back of demand concerns from China, which is tackling a COVID-19 outbreak in Beijing. Iron ore declined 2.2 per cent last week, its first decline in six weeks, so the big miners — Rio Tinto, BHP and Fortescue — could come under pressure as traders take profits.

Elsewhere, goldminers may do well in the risk-off environment, Mr Felsman said.

The gold futures price on Friday rose by $US21.90, or 1.3 per cent, to $US1753 an ounce.