ASX may advance on GDP, iron ore and Trump tax
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The spot price of iron ore rose $US1.98, or 2.9 per cent, to $US70.11 a tonne on Friday, according to Metal Bulletin. Asim Hafeez
by Timothy Moore
Australian shares could get a boost this week from further gains in the iron ore price, progress for Donald Trump's tax plan and hopes of an Australian economic growth pickup in Wednesday's national accounts release.
NAB's chief markets economist, Ivan Colhoun, said the bank is looking for a 0.7 per cent to 0.8 per cent quarter-over-quarter lift in economic output, slightly faster than the Reserve Bank's 0.6 per cent forecast. "This will see annual growth printing close to 3 per cent," Mr Colhoun said in a weekend note.
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"More importantly the RBA has been growing more confident in its view and forecast that the Australian economy will strengthen over the next few years. Such a GDP print would help with that confidence, as will the upgrade evident in capex spending expectations data released this week."
Also of note this week is tomorrow's final RBA board meeting of the year. "We do not expect a change in tone for the final meeting for the year," TD Securities said. "After
the saturation of RBA-speak last month, surely nothing left to say." The board then will next meet in February.
Optimism about the global economy continues unabated, a reason why global equities have proved adept at extending their bull run.
"If the [Republicans] tax bill eventually passes, it will give an added short-term boost to the US economic growth outlook [perhaps adding a quarter percentage point to GDP growth in 2018], and further juice markets over the near term," said Bank of Montreal chief economist Doug Porter. "That is, at least until the attention turns suddenly to government funding and the on-rushing debt ceiling limit" or the Russia investigation.
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This week's November US payrolls report is expected to show employers are still hiring in droves and that wages are slowly but surely rising. Fear of missing out is clearly helping to check downside momentum.
Over the weekend, copper, aluminium and Brent crude each recorded more than 1 per cent gains, while the spot price of iron ore added 2.9 per cent to retake the $US70 a tonne mark.
"We expect growth to weaken further in the coming months as the drags from slower credit growth, reduced fiscal support and the pollution crackdown intensify," said Mr Evans-Pritchard.
At least for the moment, demand is holding. In addition to copper and aluminium advancing in London, lead, zinc and nickel did too.
As for iron ore, it extended a now more than one-month rally amid solid demand from Chinese buyers as steel prices there edged higher and mandatory production cuts across the northern part of the country took effect.
The spot price of iron ore rose $US1.98, or 2.9 per cent, to $US70.11 a tonne on Friday, according to Metal Bulletin;
continuing to defy naysayers.
Chinese officials last month began to force the closure of some steel mills as part of a plan to check air pollution through March. Part of the reason for the spot price of iron ore rising was increased demand for higher quality, imported, ore to maximise output. That's in keeping with
a decision by Fortescue Metals Group to ship mostly high-grade iron ore in the future.
Steel prices are expected to continue on its upwards path and more than likely drag iron ore along for the ride .
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