Stockmarket tipped for early rise on offshore leads

The Australian sharemarket is expected to open in positive territory on Monday.

Gains are expected as the stockmarket opens on Monday. Picture: AAP

The Australian sharemarket is expected to open in positive territory on Monday, clawing back losses from the end of last week as traders eye positive overseas leads despite rising geopolitical tensions.

ASX futures are pointing to a gain of 65 points, or 1.2 per cent, at the open, which would more than reverse Friday’s 1 per cent fall. It follows US sharemarkets holding up during Friday’s session despite ongoing US-China trade tensions.

The local sharemarket will start the week playing catch-up, AMP head of investment strategy and chief economist Shane Oliver said.

“The ASX 200 fell 1 per cent on Friday and that was in response to a few things, but particularly the perception that tensions between the US and China were escalating,” Dr Oliver said. “It may have also been impacted by the Chinese government ditching its growth forecasts for the year.”

Beijing last week said it would not set a target for its economic growth for 2020 due to uncertainties about COVID-19’s impact.

“There was anticipation that the US sharemarket would fall on Friday night, but in the end that didn’t happen. The US sharemarket was a bit wobbly at the start but managed to close flat on the Dow and up 0.2 per cent on the S&P,” Dr Oliver said.

CommSec chief economist Craig James is expecting a quiet day of trade to start the week due to the Monday Memorial Day holiday in the US, but said local data out later in the week, such as consumer confidence, construction data and capital expenditure figures, would be closely watched.

“In the US the focus is very much on housing indicators, such as new home sales and home ­prices,” Mr James said. “The local sharemarket has lifted for eight of the last nine weeks, so clearly we’ve done very well since the lows in March and this week we’ll get off to a relatively quiet start.”

Tensions in Hong Kong were also sitting in the background, he cautioned. “It’s an evolving situation, the relations between China and many parts of the world … China probably has this sense that the world is against it at the moment but that’s certainly not the case,” he said.

Around the region, Hong Kong’s sharemarket will be closely watched after the Hang Seng Index fell 5.6 per cent on Friday.

Meanwhile, Dr Oliver expects debate to continue around the JobKeeper error after the government on Friday admitted the subsidy scheme would now cost $70bn, rather than $130bn initially forecast, and would only cover 3.5 million ­people, rather than 6.5 million Treasury had expected.

“On one hand it might suggest the economy is not as weak as Treasury had assumed,” he said.

“It also suggests there’s scope to relax JobKeeper and make it available to more people or extend it.”

Dr Oliver also expects the dollar to gradually strengthen as economies re-open. “Providing major economies continue to re-open, the Aussie dollar will probably drift higher,” he said.

“Tensions around trade with China and the US-China relationship may cause bits of volatility with the Aussie dollar but the major picture is one of recovery.”

The dollar was last buying US65.3c.