The market looks set to open up thanks to a strong performance by the US economy, a rise in the iron ore price and a dull G20 summit.

July 9, 2017

The ASX looks set to open up on Monday, thanks to strong jobs figures from the US, a bounce in the iron ore price and a G20 summit that delivered no surprises.

AMP Capital’s chief economist Shane Oliver says while the summit was disappointing, it delivered no new negatives, including the US refusing to support the Paris agreement on climate change and free trade.

“The divergence between the US and the other 19 members was well known before we went to the summit,” Mr Oliver said.

“I think the market will take it in its stride.”

The stronger than expected jobs growth in the US, coupled with relatively low inflation pressure, produced a “Goldilocks payroll figure” on Friday – “not too hot, not too cold, just right” – pushing the Dow Jones up by 0.4 per cent and the S&P 500 by 0.6 per cent.

“Because of that, overnight the ASX 200 Futures Index rose 10 points – it’s the best guide to what our market will do on Monday,” Mr Oliver said.

He said the rise in the iron ore price on Friday in China to $62.80 per tonne would also help.

But economists said don’t be surprised if the ride remained bumpy and the dollar remains stuck in the range of 75 or 76 cents US.

CommSec’s chief economist Craig James said soft commodities markets last week – falls in gold (1.1 per cent), oil (3 per cent) and tin (2.1 per cent) – would restrain the mining and energy sectors on Monday.

On the data front, NAB’s business confidence survey figures, to be released on Tuesday, looks set to deliver news of continued strong business confidence.

In contrast, Westpac’s consumer confidence index on Wednesday is likely to show consumer sentiment remaining weak.

“That combination of low wages growth, high levels of under employment and rising power costs will act as a bit of a bit of a drag on consumer confidence,” Mr Oliver said.

“That will keep retailers under a bit of a cloud.”

Mr Oliver said if consumer confidence figures remained weak it would act as a “drag” on Australia’s major retailer’s stocks.

ABS lending figures due for release on Thursday may show a moderate bounce in new loans, but economists say the market won’t react thanks to continued softening following APRA’s tightening of the lending regulations.