The Australian markets are expected to start strong this week on the back of stock gains in the US and Europe, but data is likely to show a further slump in house prices.
Wall Street and European markets closed higher for the ninth consecutive week on Friday, indicating a bigger open of the ASX on Monday.
The S&P was up 0.6 per cent and the Dow increased 0.07 per cent largely on the back of ongoing optimism of a trade deal being reached between China and the US, with talks continuing on Sunday.
‘We’re on track for a positive start of probably about 10 points, but it could be more if there’s more good news on trade, obviously if the trade talks fail then it might go negative,’ AMP Capital’s chief economist Shane Oliver says.
But that good news is likely to be followed by an unwelcome drop in house prices when new data is released on Friday.
Prices have continued to fall through February and Dr Oliver believes the drop will be around 0.7 per cent, a smaller figure on its own but significant after a yearlong tumble.
‘If it was around 0.7 or 0.8 per cent that’s a lesser fall than we saw in January, but then it’s still consistent with prices falling, so it feeds into that debate about whether the Reserve Bank will cut interest rates again,’ he said.
‘As housing slows, less houses are built so there is less work for construction workers, which has a direct negative impact on the economy.
‘And then there’s an indirect impact, as house prices fall, people feel less well off … so people are less willing to spend.’
Melbourne prices are already down almost 10 per cent, Perth is down 16 per cent, Darwin is down about 25 per cent.
The benchmark S&P/ASX200 index finished up 28.1 points, or 0.46 per cent, at 6,167.3 points at 1615 AEDT on Friday, while the broader All Ordinaries was up 27.3 points, or 0.44 per cent, at 6,241.9.