ASX: Mixed overseas leads suggest a flat start for Australian stocks

The Australian sharemarket is in for a cautious start to the week following mixed overseas leads.

Technology and energy names likely to face some pressure as traders eye a meeting of the US Federal Reserve and economic data out of China. Picture: Getty Images

The Australian sharemarket is in for a cautious start to the week following mixed overseas leads, with technology and energy names likely to face some pressure as traders eye a meeting of the US Federal Reserve and economic data out of China.

The big miners, meanwhile, may get a boost on the back of solid gains in the iron ore price that drove both Rio Tinto and BHP higher in London trade.

The S&P/ASX 200 is tipped to open just four points, or a tenth of 1 per cent, higher on Monday ahead of the US central bank’s monthly meeting on Wednesday and Thursday, as well as retail sales, production and investment data out of China.

The expected soft start comes after US sharemarkets last week posted sharp losses led by traders taking profits in the high-flying technology stocks.

On Friday, the Dow Jones index gained 131 points, or 0.5 per cent, to 27,665.64 and the S&P500 index rose 0.1 per cent to 3340.97. But the Nasdaq index fell 66 points or 0.6 per cent to 10,853.55.

Over the week, the Dow slipped 1.7 per cent, the S&P 500 fell 2.5 per cent and the Nasdaq tumbled 4.1 per cent in its biggest weekly loss since mid-March. Facebook, Apple and Netflix all lost more than 5 per cent over the week.

Recent selling pressure of technology stocks in the US is a sign of a healthy correction, according to CommSec chief economist Craig James.

“Go back a couple of months and the expectation was that people in lockdown are going to be consuming more technology, Netflix and the like.

“As we continue to come out of the lockdown phase, it’s right and proper to be able to take some of the profit on the technology stocks and embrace some of the more travel-oriented stocks, including cruise lines. So I think that’s what we’re seeing at the moment,” he told The Australian.

Mr James expects a degree of support for Rio Tinto and BHP on Monday, following a lift in the iron ore price late last week.

Iron ore gained 2.2 per cent to $US129, driving Rio Tinto up 4.3 per cent and BHP up 2.1 per cent on Friday night.

“So I think certainly the prospects continue to be positive in terms of China’s economic recovery and that sustaining growth happening in terms of the iron ore price,” Mr James said.

“But in energy and technology, probably a little bit softer and probably a cautious start in terms of the rest of the industrials.”

All eyes will be on the US Federal Reserve later in the week, with onlookers hoping the central bank will provide further guidance on its long-term low interest rate strategy.

Locally, minutes of the Reserve Bank’s September policy meeting will be released on Tuesday, while the bank’s head of domestic markets, Marion Kohler, will speak at a conference on Thursday. The Australian Statistics Bureau will release labour force figures on Thursday.

The local sharemarket ended Friday’s session lower, down 49.1 points, or 0.83 per cent, at 5859.4, after opening at a 2½-month low. The All Ordinaries fell 51.1 points, or 0.84 per cent, to 6038.9.