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The sharemarket is set to open higher on Monday, after Wall Street bounced last week amid hopes the US Federal Reserve will keep interest rates on hold, and as investors await the Reserve Bank’s next move.
Futures were pointing to the ASX 200 rising 14 points to 7,000.00, an increase of 0.2 per cent, while the Australian dollar was fetching US65.09¢ on Monday morning. The ASX 200 rose 1.1 per cent on Friday.
Wall Street rallied last week on hopes the US Fed is done with interest rate hikes.Credit: AP
The S&P 500 climbed 40.56 points on Friday, or 0.9 per cent, to 4,358.34 and rose every day of the week. The Dow Jones Industrial Average gained 222.24, or 0.7 per cent, to 34,061.32, and the Nasdaq composite jumped 184.09, or 1.4 per cent, to 13,478.28.
Stocks surged through the week on rising hopes the Federal Reserve is finally done with its market-crunching hikes to interest rates, meant to get inflation under control. A report on Friday underscored that pressure is easing on inflation after it showed employers hired fewer workers last month than economists expected.
It’s a stunning turnaround from just a week ago, when Wall Street was reeling after the S&P 500 had fallen 10 per cent below its high point for the year. That sent Wall Street’s main index into what investors call a “correction.”
Since then strong profit reports helped drive some stocks to towering gains. Generac, a maker of backup generators, soared nearly 28% for its best week since its stock began trading in 2010. At Expedia Group, another stronger-than-forecast report sent its stock nearly 22 per cent higher for its best week since the market was surging out of the coronavirus crash in early 2020.
But it was interest rates, yields and inflation that were at the centre of all the wild movements for financial markets around the world.
Before last week week, stocks had been struggling under the weight of rapidly rising Treasury yields. Those yields were in turn catching up to the Fed’s main interest rate, which is above 5.25 per cent and at its highest level since 2001.
Higher rates and yields slow the economy, hurt prices for investments and raise the risk of something breaking within the financial system, such as the three high-profile U.S. bank failures that rattled financial markets during the spring.
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