The Australian share market is set for months of volatility amid uncertainty about the trade and economic policies of incoming US president Donald Trump’s policies, a leading economist has warned.
The former reality TV star’s election victory dominated the market moves last week with both US and Australian markets ending the week higher. The S&P/ASX 200 benchmark index was up 41.9 points at 5,370.7 on Friday.
But that movement is expected to pull back slightly on Monday, according to AMP Capital’s chief economist, Shane Oliver.
“We’ll probably come off a little bit, maybe 15 points, giving up a little bit of the gains we have seen in the last week,” he said.
US politics would remain a strong focus throughout the week as markets continue to evaluate what his presidency will mean, the good and the bad, Oliver said.
“Initially markets sort of fretted about his protectionist policies and the impact on free trade,” he said. “There is a lot of things in there which, despite Donald Trump’s rhetoric, Wall Street actually likes.”
The former Australian foreign affairs minister Bob Carr has warned in the Guardian that Trump’s threat to slap 45% tariffs on Chinese goods entering the US would trigger a trade war that could knock several percentage points off Chinese growth and “tip Australia into recession”.
On Friday the region’s emerging markets were hit by concerns about trade, causing a selloff on stock markets and of currencies as the US dollar soared.
China’s currency, the yuan, also slipped in value as Beijing fixed its rate above 6.8 to the dollar for the first time in six years. It actions will amplify concerns in the Trump team that its economic rival is a “currency manipulator”.
The week ahead sees a slew of economic data in Australia and in China and Japan, which will focus investor attention.
The resources giant BHP Billiton is due to hold its meeting in Brisbane on Thursday and is expected to give a positive outlook, after a steady rise in iron ore and coal prices.
“The huge gains in iron ore and coal prices are going to be a bit of a bonanza for BHP profits if they’re sustained and I suspect their comments on Thursday will probably reflect that,” Oliver said.
The latest figures on wages growth are expected to hold steady at 2.1 per cent annually, while the unemployment rate is set to rise despite solid jobs growth after a jump in participation, he said.
Elsewhere, the Reserve Bank of Australia’s minutes and a speech from governor Philip Lowe are expected to show the RBA is happy to leave interest rates where they are, Oliver said.
• Australian Associated Press has contributed to this report
