Local stocks expected to continue to rise as investors eye new record

Global equities climbed to new record highs last week, underpinned by growing expectations of a strong rebound in the global economy. The ASX200 added 0.9 per cent, with SPI futures pointing to a 0.6 jump for the index to begin the new week. In the week ahead, the economic calendar is jam packed, as market participants look to the end of a month November that’s shaping as the best on record for stocks.

Here are some events to watch in the week ahead…

Australian shares are expected to make a strong start to the week, possibly touching new highs at the end of November.
Australian shares are expected to make a strong start to the week, possibly touching new highs at the end of November. Credit:Louie Douvis

Australian GDP data

The highlight for the week locally will be GDP figures for the September quarter. It’s expected the data will reveal positive growth for the quarter, ending – technically speaking – Australia’s COVID-19 recession. Economists’ consensus estimate is for a 1.7 per cent expansion in GDP last quarter, which will come off the back of the 7.0 per cent drop in the previous quarter, and the 0.3 per cent drop in the quarter before that. While a technical end to the recession is undoubtedly a good thing, the GDP numbers are expected to reveal underlying vulnerabilities to the economic recovery, with government spending once again tipped to have driven the return to positive growth.


The final RBA meeting for 2020

Tuesday afternoon will see the final meeting of the RBA for 2020. No change to policy is expected from the central bank, after its sweeping changes to monetary settings last month. It’s been a historic year for the RBA, which has seen the central bank cut rates three times, and implement a raft of unconventional policies, including a quantitative easing program, in order to support the Australian economy out of recession. The market isn’t expecting many surprises out of the RBA at this meeting. However, commentary about the Australian Dollar will be closely followed, as the currency edges towards year-to-date highs, despite the RBA’s launch of its QE program.

US economy

The week will come to a climax with US Non-Farm Payrolls (NFP) data on Friday. Amidst surging COVID-19 cases across the country, and a lack of fresh fiscal support, there are increasing signs that the US economic recovery is slowing down. The NFP numbers are forecast to show another month of jobs growth for the US economy, with economists’ consensus estimates suggesting 500,000 jobs were created in November. The issue of economic stimulus will be front and centre in the new week, as US Fed Chairperson Jerome Powell and US Treasury Secretary Steven Mnuchin testify before US Congress. The joint testimony comes after relations between the Fed and Treasury became frayed a fortnight ago, after the Treasury demanded the return of funds the Fed had been using to support several of its stimulus programs.

OPEC meeting and oil prices

Oil prices will be in focus during the week, as members of OPEC+ gather for their biannual meeting to discuss the energy market and oil production. The price of oil spiked to nine month highs last week on optimism about the global economic outlook, courtesy of recent vaccine developments, as well as speculations that OPEC+ would delay output increases further into 2021. It’s believed that OPEC+ will use this meeting to rubber stamp its decision on production, as it looks to maintain stability in still fragile oil markets.

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This column was produced in commercial partnership between The Sydney Morning Herald, The Age and IG. Information is of a general nature only.

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