The prospect of lower interest rates in the United States is expected to inspire a stronger opening by Australian shares on Thursday as investor concerns about the economic outlook ease.
Buoyed by a stronger finish on Wall Street on Wednesday (Thursday AEDT) traders had pushed the S&P/ASX 200 March share price index contract up 51 points (+0.65%) from the previous settlement to 7,838 by 9:20 am AEDT (10:20 pm GMT Wednesday).
The main United States stock indices finished higher on Wednesday as the Federal Reserve held interest rates steady and maintained their outlook for two rate cuts in 2025 with the Dow Jones Industrial Average rising 0.9%, the S&P 500 1.1% and the Nasdaq Composite 1.4%.
The Fed kept its benchmark interest rate steady in a range of 4.25% to 4.5% but policymakers reaffirmed their projection for two rate cuts later this year while saying “uncertainty around the economic outlook has increased”.
The Australian sharemarket resumed its descent on Wednesday, having climbed for three successive days, with the S&P/ASX 200 dropping 0.4% to 7,828.3 as 10 of the 11 sectors ended in the red.
Morgans Financial private client adviser Lachlan Walsh said concerns the market sell-off would continue this week had been allayed.
“There’s not as much fear as we thought which means we’re getting close to the end of the sell-off than the continuation,” Walsh said.
“We had (expected) a positive bump in the next month.”
He said the market was buoyed by the prospect of lower U.S. interest rates and more Chinese economic stimulus measures, which would help mining stocks.
“We though we might see a rotation into resources which we see as undervalued compared with banks, which are trading on high (price earnings ratios) and low yields,” Walsh said.
Companies in focus today will include Washington H. Soul Pattison (ASX: SOL) and Brickworks (ASX: BKW), which have announced their interim results, while A2 Milk Company (ASX: A2M) and Cochlear (ASX: COH) will trade ex dividend.
In bond markets, the 10-year Treasury yield fell 0.48 to 4.397%, while the 2-year yield declined 0.40% to 3.775%.
