The Australian share market is set to start the trading week lower after Friday’s heavy losses on Wall Street, but experts are hopeful a “Santa Claus rally” will push it back up going into Christmas.
Ongoing worries about weakness in the global economy have so far kept markets flat in December. Investors are also worried about the US-China trade war and dour economic data from China.
On Friday, the Dow Jones Industrial Average fell almost 500 points, or 2 per cent, the S&P 500 index lost 1.9 per cent and the tech-heavy NASDAQ fell 2.6 per cent.
AMP Capital’s chief economist Shane Oliver said while the Australian market will open in the red on Monday, it may not experience the full extent of the drop felt in the US.
“That’s because we had a more than 1 per cent fall on Friday, so to some degree we’ve already anticipated the fall on Wall Street,” he told AAP.
The futures market predicts that the benchmark S&P/ASX 200 will fall 0.6 per cent, or 30 points, lower when Australian trading resumes.
Despite the disappointing start to December, Dr Oliver says there is hope the third week of December will bring a a traditional “Santa Claus rally”.
“People tend to feel happier going into Christmas and the end of the year,” he said.
“The last two weeks of December are usually fairly solid on share markets … it will be interesting to see whether that Santa rally gets through.”
In other potentially market-moving news, federal Treasurer Josh Frydenberg is expected to release the mid-year economic and fiscal outlook on Monday.
Dr Oliver said he is expecting the figures to show a substantial improvement in the government’s budget projections.
Even factoring in upcoming election spending, he said the figures indicate the government will have some scope to provide fiscal stimulus spending increases or tax cuts before Australians head to the polls in May.
The Reserve Bank of Australia will also release the minutes from its board’s monetary policy meeting for December on Tuesday.