The Australian share market is tipped to move into the 6,000-level following back of better-than-expected US jobs figures, higher commodity prices and a continued tail-off in Australian coronavirus cases.
On Friday the S&P 500 was up 2.6 per cent, the Dow Jones Industrial Average gained 3.2 per cent and the NASDAQ rose 2.1 per cent after US unemployment unexpectedly fell to 13.3 per cent in May, from 14.7 per cent in April.
Economists had been bracing for the US unemployment rate to rise to nearly 20 per cent, so the figures buoyed hopes for a V-shaped economic recovery.
On Friday, Australia’s benchmark S&P/ASX200 index rose 0.12 per cent to 5,998.7, having gained 4.2 per cent for the week, while the All Ordinaries was up 0.07 to 6,116.47.
Futures traded on Saturday were pointing to a gain of 101 points, or 1.68 per cent, once the market resumes on Tuesday following Monday’s day off for the Queen’s Birthday.
“Tuesday, we’ll have to play catch up,” said CommSec chief economist Craig James.
“We’ll see what happens after Monday’s session in the United States, we could be up something of that order of magnitude” as the futures market suggested, Mr James said.
The jobs figures were “a huge shot in the arm for markets”, he said.
The ASX200 briefly traded above 6,000 on Thursday and Friday, but both days closed below it – as it has every day since March 6.
Friday’s closing level is still down 10.25 per cent from the start of the year, but represents a gain of 36.3 per cent from the nadir of 4,402.5 set on March 23, the date the lockdowns began.
In addition to the Wall Street gains, a rise in price of oil and base metals could help energy producers and miners, Mr James said.
Brent crude prices on Friday broke through the $US40 a barrel level for the first time since early March, and had last traded just under $US43 after Saudi Arabia hiked prices following supply cuts by the OPEC+ cartel.
Tin, copper and iron ore prices were up as well, with copper prices rising 2.9 per cent to a three-month high.
As far as economic data goes, this week will be “an interesting change in speed for statistical releases” following last week when “everything but the kitchen sink” was announced, Mr James said.
The data included retail trade, net exports, first-quarter gross domestic product and building approvals, as well as the decision by the Reserve Bank of Australia to keep the cash rate on hold at a record-low 25 basis points.
Federal Treasurer Josh Frydenburg on Wednesday said that country was in recession after GDP figures showed the economy had contracted slightly in the three months to March 31.
“This week is a whole lot quieter,” Mr James said, with the main data on Australia’s economic calendar business and consumer confidence figures.
Also, the Federal Reserve holds its two-day Open Market Committee meeting, with Fed chairman Jerome Powell holding a closely-watched press conference at the conclusion of the event on Thursday morning (AEST).
The very small number of coronavirus cases reported in Australia over the long weekend could also bolster market sentiment and consumer confidence, Mr James said.