Shares to avert correction as All Ords flirts with dangerous territory

Futures indicate the S&P/ASX 200 index will advance 1.1 per cent at Monday’s opening of trade after Wall Street shook off the threat of a government shutdown.

Tariffs and trade wars to keep investors rattled this week. Picture: Gaye Gerard

A Wall Street bounce and hopes the Reserve Bank will be more aggressive on rate cuts to shield the economy from a trade spat put Australian shares on improved footing, keeping the All Ordinaries index out of correction territory.

The All Ordinaries cohort of 500 ASX companies is down 9.2 per cent since February 14 following turmoil in global equities. A loss of 10 per cent marks a correction.

However, the skirting of a possible US government shut down boosted Wall Street on Friday and the S&P 500 rose 2.1 per cent to 5638.9 points. It was still the worst week since 2023 for the Dow Jones Industrial Average, which advanced 1.65 per cent on Friday.

The benchmark S&P/ASX 200 Index is tipped to rise 1.1 per cent at Monday’s open from its closing level of 7789.7. It has dropped 8.95 per cent since this year’s high, also on February 14.

But tariffs and trade wars continue to keep investors nervous, with President Trump’s announcements combined with large cuts to the US federal government and its workforce ratcheting up the risk of a recession in the world’s biggest economy.

“Trump’s refusal to rule out a recession and others in his administration saying a recession might be ‘worth it’ and referring to a ‘detox period’ are adding to investor concerns,” said AMP chief economist Shane Oliver.

Dr Oliver sees US tariffs, which are hurting Australian industries, as adding to the case for further RBA rate cuts and he expects the next cut in May, followed by more easing in August and February.

“A continuing escalation in the global trade war would mean that the RBA will cut more aggressively,” Dr Oliver added.

The upcoming federal budget on March 25 is likely to see more stimulus.

“The good news is that the revenue windfall from stronger than expected employment and key commodity prices along with bracket creep will mean the starting point for the budget will be $10bn to $15bn better this financial year and next.”

On the economic front this week, Australian jobs data for February, issued on Thursday, is expected to show a slowing in jobs growth to 25,000 and unemployment unchanged at 4.1 per cent.