Weaker iron ore to keep shares subdued

AUSTRALIAN shares are expected to open the week slightly lower with iron ore prices expected to keep a cautious tone in the market.

DESPITE a positive lead from Wall Street, Australian shares are expected to open the week slightly lower because weaker iron ore prices are expected to keep a cautious tone in the market.

Australia’s key share price ­futures index was pointing to 2-point fall on opening.

Local shares ended on a weaker note on Friday, capping off three straight losses after being weighed down by weakness in iron ore prices. A key iron ore index dropped below $US85 a tonne in China, for the first time in five years, to $US83.60.

Wall Street’s S&P 500 index jumped to a fresh record on ­Friday after investors concluded that a disappointing August jobs report would discourage the US Federal Reserve from quickly raising interest rates.

The broadbased S&P 500 bolted 10.06 points, or 0.50 per cent, higher to 2007.71, improving on a record set last week by about four points. The Dow Jones Industrial Average rose 67.78, or 0.4 per cent, to 17,137.36, narrowly missing a record of its own.

Under focus this week will be unemployment figures for ­August, scheduled for release on Thursday. The economy is expected to have added 15,000 jobs during the month, ensuring a slight drop in the employment rate to 6.3 per cent.

“The fall in commodity prices, and specifically the iron ore price, is a blow to national income. But thankfully lower interest rates are helping to drive a bounce back in other sectors of the economy, like housing and retailing, that were suppressed by the mining boom,” said Shane Oliver, AMP Capital’s head of investment strategy.

“There is still plenty of scope for interest rates to fall further if needed and for the Australian dollar to fall, which I think it will over time, providing a shock ­absorber for the economy,” he said. The dollar was last trading at a five-week high of US93.69¢.