Australian investors are set for a modest start to the week, with S&P/ASX 200 futures pointing to a 3-point advance on Monday, following Friday’s positive session on Wall Street (Saturday AEST). US equities, including the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite, gained ground amid renewed optimism for a diplomatic resolution between the US and Iran. This sentiment briefly pushed oil prices below US$104 a barrel. The S&P 500 rose 0.5 per cent to 7743.4, led by information technology and industrials, while the bond market saw relief as the 10-year Treasury note yield finished lower at 5.16 per cent.
The diplomatic hopes are spurred by Iran’s offer to reopen the Strait of Hormuz and resume nuclear program talks, conditional on the United States lifting its naval blockade, waiving oil sanctions, and observing a ceasefire. Domestically in the US, economic signals were mixed, with the University of Michigan’s consumer sentiment index falling to 48.1 in September. Year-ahead inflation expectations also jumped to 4.6 per cent, marking the largest single-month gain in nearly six months, suggesting ongoing inflationary pressures which economists believe will keep the Federal Reserve hawkish.
Attention in Australia is now sharply focused on Tuesday’s Reserve Bank of Australia (RBA) board meeting, where markets widely anticipate another interest rate hike. Bank of America projects a unanimous 0.25 percentage-point increase in the cash rate to 4.6 per cent, citing persistent inflationary pressures and economic resilience. The global financial institution notes recent RBA communication indicating that upside inflation risks are materialising. Following this, Wednesday will bring the latest inflation check with the release of August Consumer Price Index (CPI) data. NAB anticipates headline CPI to rise to 4.1 per cent year-over-year in August from 3.5 per cent in July, driven primarily by higher fuel prices.
