Lockdowns to keep lid on Australian share market

The Australian sharemarket is set for a muted start to the week as sentiment takes a hit on the latest Covid-19 outbreaks and lockdowns.

Negative sentiment is likely to seep into Monday’s trade on the Australian sharemarket. Picture: NCA NewsWire/David Swift

The Australian sharemarket is set for a muted start to the week as sentiment takes a hit on the latest Covid-19 outbreaks and lockdowns, with all eyes on travel, transport and leisure stocks.

SPI futures are pointing to a five-point gain at the open after mostly positive overseas leads, but the latest lockdowns in NSW and the Northern Territory, alongside fresh restrictions in WA and further community transmission in Queensland, could push the ASX into the red as parts of the market come under pressure.

Any decline will likely be constrained, Commsec chief economist Craig James said.

“We’ve just got to wait it out and make sure we can get the case numbers down. But it does have an impact on travel and leisure stocks, the likes of Qantas, Flight Centre and Webjet,” he said.

For the financial sector, it will be business as usual, with extended support measures to lockdown-affected customers a positive for the banks, according to Mr James.

“Banks are in a position to be able to provide that assistance and you want to see businesses continue to be supported and do well. It’s also a positive for the broader economy,” he said.

While consumer staples Woolworths and Wesfarmers could get a welcome bounce on Monday, other stocks may not fare so well.

“The fact that, not just NSW, but NT, is in lockdown, alongside concerns about some of the other states – that will weigh on business income and profitability.

“While it’s likely the supermarkets will do okay in this environment, it will put downward pressure on travel, transportation and leisure stocks,” Mr James said.

Major iron ore miners BHP and Rio Tinto may move higher at the start of the week after both companies saw solid gains on the UK sharemarket on Friday night.

Oil majors could also see a bounce after oil prices hit two-and-a-half-year highs at the end of last week and ahead of an OPEC meeting on Thursday.

“They have been very successful to date in constraining supplies in the market and I think that discipline is likely to be maintained,” Mr James said.

On Friday, Australia’s share market largely shrugged off the news of extended travel restrictions and a then one-week lockdown of four local government areas in Sydney.

The S&P/ASX 200 index closed up 0.5 per cent at 7308, with utilities, materials, consumer discretionary, industrials and financials outperforming through the session.

The gain on the ASX was followed by rises on the S&P 500 and Dow Jones, while the Nasdaq ended the session in negative territory. European sharemarkets also finished mostly higher.

On the data front, consumer sentiment is released on Tuesday, while home price data is due on Thursday. In the US, the jobs figures are released on Friday night local time.