Sharemarket set to open week lower as US debt ceiling talks stall

US debt ceiling talks cancelled Joe Biden’s trip to Australia and are set to create wobbles in the local sharemarket this week.

The local sharemarket is expected to open lower on Monday as talks to raise the US debt ceiling stalled, sparking fears across financial markets.

ASX SPI Futures are pointing to an 11 point, or 0.2 per cent, drop to 7289, following losses on Wall Street on Friday night.

The S&P 500 fell 0.1 per cent to 4191.98, while the Dow Industrial Average eased 109.28 points, or 0.3 per cent and the Nasdaq Composite shed 0.2 per cent.

AMP Capital chief economist Shane Oliver said shares could have a “further tactical bounce if there is a quick US debt ceiling deal” but they “continue to look vulnerable over the next few months”.

“From their lows last year, global and US shares are up 17 per cent and Australian shares are up 13 per cent as investors have been buoyed by evidence of peaking inflation, anticipation that central banks are near the top and so far resilient growth and profits,” Dr Oliver said.

“However, we remain of the view that global and Australian sharemarkets are vulnerable to a rougher period ahead. Sharemarket gains so far have been narrowly based favouring defensive sectors than would be normal at this point in a recovery; US debt ceiling brinkmanship and eventual resolution could create volatility ahead; banking stress is continuing in fits and starts in the US resulting in additional monetary tightening; leading economic indicators continue to point to a high risk of recession in the US and Australia.”

Out of cycle company earnings continue this week with Technology One reporting on Tuesday, Webjet on Wednesday and Select Harvests on Friday.

CommSec chief economist Craig James said highlights in the week ahead include the flash, or preliminary, reports on manufacturing and services activity, to be released on Tuesday.

“The surveys are the timeliest measure on economic activity,” he said.