Australian stocks will open lower following falls on Wall Street and European market on Friday.

August 20, 2017

The Australian stock market is expected to start the week on a softer note on Monday after the US and European markets both closed lower on Friday.

Wall Street’s midday rally on Friday, following the departure of Trump strategist Steve Bannon’s from the White House, was short lived after nervous investors sold shares on the back of the gains due to ongoing fears a US stock market correction isn’t far away.

This profit taking dragged the US markets back down at the close while Friday’s terrorist attack in Barcelona, which killed 13 and injured more than 100 people, saw the European market also close lower.

AMP Capital’s chief economist Shane Oliver said although it points to a quiet opening on the ASX, the three per cent increase in the price of oil and iron ore had protected local resources stocks.

“It’s suggesting a flat to slightly down start at the open of maybe four or five points,” said Dr Oliver.

On the data front there’s not much happening this week, so all eyes will be on the more than 100 big companies reporting their earnings locally.

On Monday the highlights will be Fortescue Mining and Bluescope, on Tuesday it’s BHP, Amcor and Oil Search, on Wednesday’s it’s Woolworths, and IAG, while on Thursday it’s Scentre Group and Santos, and on Friday it’s Qantas and Medibank Private to name just a few.

Dr Oliver said while profits are up from where they were a year ago, there’s less companies surprising on the upside.

“On my count, so far, it’s the lowest level of upside surprise since 2013,” he said.

Internationally all eyes will be on Jackson Hole in Wyoming, as the world’s central bankers gather to talk.

While locally, continuing instability in Canberra may begin to have an effect on Australian shares.

Dr Oliver said although the market had ignored recent developments in federal politics, if concerns about an early election and a change of government begin to surface, things could change rapidly.

The federal Labor party is committed to both a banking Royal Commission and it wants to curtail negative gearing and reduce the capital gains discount received by investors.

If an election looks likely, keep an eye on property trusts, the banking sector, and the Sydney and Melbourne property markets, Dr Oliver said.