Australian shares are set to reach a fresh high on Monday, with futures indicating the S&P/ASX 200 Index will rise 0.4 per cent at the opening bell. This extends a week of strong gains, which saw the benchmark climb 3.5 per cent, its biggest increase in four months, hitting record highs. This momentum follows Wall Street, where the S&P 500 closed at a record, buoyed by strong company results and an unexpectedly weak US employment report. The US data led financial markets to scale back expectations of an interest rate increase by the Federal Reserve at its mid-September meeting.
Locally, the Reserve Bank of Australia’s policy meeting on Tuesday takes centre stage. The RBA is widely expected to keep the cash rate at 4.35 per cent, having raised it three times since February to control inflation. However, economists warn policymakers are likely to maintain firm warnings about price growth, repeating the risk of further tightening. While all 37 analysts surveyed by Reuters predict a hold, David Robertson, chief economist at Bendigo Bank, believes the next rate move is still upwards. Emanuel Datt, chief investment officer at Datt Capital, stressed that any language hinting at a future rate increase would affect confidence.
Investor attention also shifts to a busy week of company earnings, led by Commonwealth Bank, Telstra, ANZ, Westpac, Origin, and Life360. Company reporting seasons are increasingly unpredictable, with stocks moving an average of 6 per cent on results day in the February season. Commonwealth Bank, a crucial financial institution, offers valuable data on housing performance and its loan book, serving as a bellwether for future economic activity. Despite market volatility, Datt Capital maintains a positive medium-term outlook for shares, particularly for major technology firms like Pro Medicus, Xero, and WiseTech Global. The Australian dollar also climbed to US70.77¢ on Friday, supported by global demand, and could see a further boost from a tough RBA inflation warning.
