The Australian sharemarket is set to open lower on Monday, with futures pointing to a 43-point, or 0.5 per cent, drop for the S&P/ASX 200 Index to 8774. This follows a weak Wall Street session, where the technology-heavy Nasdaq 100 recorded its worst two-week decline since April last year, reflecting faltering confidence in the artificial intelligence trade. A resurgence in Brent crude prices to just under US$117 a barrel on Friday further impacted sentiment. Escalating attacks on Saudi Arabia from Iran-backed Houthi militants have raised concerns about global oil supply and inflation, contributing to declines in both US equities and bonds.
This volatile backdrop precedes a critical week of economic events, including Australia’s third-quarter inflation report and the US Federal Reserve’s latest interest rate decision. Australian money markets are recalibrating after unexpectedly hawkish comments from Reserve Bank of Australia Deputy Governor Andrew Hauser last week, with bond traders now pricing in over a 60 per cent chance the RBA will lift the cash rate by a quarter of a percentage point to 4.85 per cent at its upcoming meeting. Several major banks also anticipate an RBA rate hike next month. The Australian Bureau of Statistics’ third-quarter inflation report, due Wednesday, is the final key data before the RBA convenes in early November, and is expected to show inflation accelerated in September, remaining above the RBA’s 2 to 3 per cent target band.
Globally, while the US Federal Reserve is expected to keep rates on hold, it has signalled a potential further increase this year. The Reserve Bank of New Zealand and the Bank of Canada are poised to raise interest rates, while the European Central Bank and the Bank of Japan are forecast to keep rates steady. Adding another layer of market focus, the technology sector will see significant earnings results from US giants Alphabet, Microsoft, Amazon, and Intel, alongside South Korean heavyweights SK Hynix and Samsung. These reports will be closely watched for indications on whether the ‘AI angst’ affecting market sentiment continues or subsides, as higher interest rates add further pressure to market dynamics.
